<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 1-7872
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
150 Allen Road
Liberty Corner, New Jersey 07938
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 903-1600
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01
(Title of class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of May 29, 1998, the aggregate market value of voting stock held by
non-affiliates of the registrant based on the last sales price as reported by
the New York Stock Exchange on such date was $160,179,930.00. (See Item 12)
As of May 29, 1998, the registrant had 6,298,180 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Annual Report for the fiscal year ended March 31, 1998 is
incorporated by reference into Part I and II hereof.
The registrant's Proxy Statement for the fiscal year ended March 31, 1998
is incorporated by reference into Part III hereof.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
TransTechnology Corporation develops, manufactures and sells a wide
range of products in two industry segments, as described below. TransTechnology
Corporation was originally organized in 1962 as a California corporation and
reincorporated in Delaware in 1986. Unless the context otherwise requires,
references to the "Company" or the "Registrant" refer to TransTechnology
Corporation (including the California corporation prior to the reincorporation)
and its consolidated subsidiaries. The Company's fiscal year ends on March 31.
Accordingly, all references to years in this report refer to the fiscal year
ended March 31 of the indicated year.
TransTechnology Corporation's core business areas are specialty
fastener products and rescue hoist and cargo hook systems. During 1998, the
Company continued its program to improve its position as one of the world's
major suppliers of specialty fasteners to the transportation and industrial
markets. Key aspects of this program include growth through acquisitions and the
consolidation and rationalization of its overseas and domestic retaining ring
manufacturing operations. Actions taken during 1998 to accomplish these goals
included the acquisition of all of the outstanding stock of TCR Corporation. For
a more detailed description of this transaction, see "Note 3" of the "Notes to
Consolidated Financial Statements" included in the Company's 1998 Annual Report
on pages 15-16 which is incorporated herein by reference. Additionally, the
necessary training and understanding of the new business information system
installed at the Company's European retaining ring facilities was substantially
completed in 1998, as well as the closing of one of the Company's two retaining
ring factories in Germany. Production from this factory was transferred
primarily to the Company's U.K. manufacturing facility and the other German
retaining ring manufacturing facility. Domestically, the Company has started the
process of consolidating its United States retaining ring manufacturing and
distribution facilities. These actions, together with additional strategic
acquisition activities during and subsequent to the close of the fiscal year,
further strengthen the Company's position as one of the world's major suppliers
of specialty fastener products to the transportation and industrial markets.
The Breeze-Eastern division makes up the rescue hoist and cargo hook products
segment, and is the world's leader in these systems which are sold primarily to
military and civilian agencies.
DISCONTINUED OPERATIONS
The following entities, discontinued in the years indicated, have been
classified as discontinued operations in the Company's financial statements:
Lundy Technical Center (chaff) (1995), TransTechnology Electronics (1995), and
TransTechnology Systems & Services (computer maintenance and service) (1995).
For a more detailed description of these transactions, see "Note 2" of the
"Notes to Consolidated Financial Statements" included in the Company's 1998
Annual Report on page 15 which is incorporated herein by reference.
SPECIALTY FASTENER PRODUCTS
The Company's specialty fastener products are manufactured by its
Seeger Group of companies ("Seeger-Orbis", "Anderton", and "Seeger Reno"), its
Breeze Industrial Products division ("Breeze Industrial"), its Palnut Company
division ("Palnut"), TCR Corporation ("TCR"), Seeger, Inc. and Industrial
Retaining Ring
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Company ("Waldes/IRR") and its Pebra hose clamp business ("Pebra"). The Seeger
Group of companies and Waldes/IRR design and manufacture highly engineered
retaining rings for both the domestic and international transportation and
industrial markets. Breeze Industrial designs and manufactures a diverse line of
high-quality stainless steel hose clamps including worm drive hose clamps,
T-Bolt and V-Band clamps, and light duty clamps for use in the heavy truck and
industrial equipment industries by both original equipment manufacturers and
replacement suppliers. Pebra designs and manufactures hose clamps primarily for
heavy truck manufacturers in Europe. The Palnut Company manufactures single and
multi-thread metal fasteners for the automotive and industrial products markets.
These include lock nuts used for load carrying in light duty assemblies or as a
supplement to ordinary nuts to assure tightness; the On-Sert(R) fastener, which
is pressed onto hollow plastic bosses to increase torque and minimize stripping;
push-nuts used as temporary fasteners that hold pre-inserted bolts in place for
final assembly or in ratchet plates which fasten onto a shaft or stud;
self-threaders used in the installation of automotive trim; U-Nuts that provide
one-sided screw assembly and are used to fasten bumpers, fenders and grills to
vehicles; and various single-threaded parts designed for insertion into metal or
plastic panels. TCR Corporation designs and manufactures sophisticated
externally threaded fastening devices and custom industrial components by
combining its expertise in cold forging and machining technologies. TCR products
are used by industrial customers worldwide, with key market groups including the
automotive, hydraulic and recreational product industries.
Specialty fasteners are marketed through a combination of a direct
sales force, distributors and manufacturing representatives. Such products
contributed 83%, 81% and 81% of the Company's consolidated sales in 1998, 1997
and 1996, respectively.
At March 31, 1998, the Company's Specialty Fastener Products segment
backlog was $43.5 million, compared to $34 million at March 31, 1997. The
increase is primarily the result of the acquisition of TCR Corporation and
increased backlog at the Company's Breeze Industrial Products division.
Substantially all of the March 31, 1998 backlog is scheduled to be shipped
during fiscal 1999.
RESCUE HOIST AND CARGO HOOK PRODUCTS
The Company's Breeze-Eastern division ("Breeze-Eastern") specializes in
the design, development and manufacture of sophisticated lifting and restraining
products, principally helicopter rescue hoists, reeling machines and external
hook systems. In addition, Breeze-Eastern designs, develops and manufactures
winches and hoists for aircraft cargo and weapon-handling systems with
applications ranging from cargo handling on fixed-wing aircraft to positioning
television cameras on blimps, antenna and gear drives. Management believes that
Breeze-Eastern is the industry market share leader in sales of personnel-rescue
hoists and cargo hook equipment. As a pioneer of helicopter hoist technology,
Breeze-Eastern continues to develop sophisticated helicopter hoist systems,
including systems for the current generation of Seahawk, Chinook, Dolphin,
Merlin and Super Stallion helicopters. Breeze-Eastern also supplies equipment
for the United States, Japanese and European Multiple-Launch Rocket Systems
which use two specialized hoists to load and unload rocket pod containers.
Breeze-Eastern's external cargo-lift hook systems are original equipment on most
helicopters manufactured today. These hook systems range from small 1,000-pound
capacity models up to the largest 36,000-pound capacity hooks employed on the
Super Stallion helicopter. Breeze-Eastern also manufactures aircraft and cargo
tie-downs.
Breeze-Eastern sells its products through internal marketing
representatives and several independent sales representatives and distributors.
Breeze-Eastern's product lines contributed 17%, 19% and 19% to the
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Company's consolidated sales in 1998, 1997 and 1996, respectively. The reduced
percentage in fiscal 1998 is attributable primarily to the acquisition of TCR
Corporation.
The Rescue Hoist and Cargo Hook Product segment backlog varies
substantially from time to time due to the size and timing of orders. At March
31, 1998, the backlog of unfilled orders was $32.4 million, compared to $32.5
million at March 31, 1997. The majority of the March 31, 1998 backlog is
anticipated to be shipped during fiscal 1999.
DEFENSE INDUSTRY SALES
Approximately 11% of the Company's consolidated sales in 1998, as
compared to 9% and 8% in 1997 and 1996, respectively, were derived from sales to
the United States Government, principally the military services of the
Department of Defense and its prime contractors. These contracts typically
contain precise performance specifications and are subject to customary
provisions which give the United States Government the contractual right of
termination for convenience. In the event of termination for convenience,
however, the Company is typically protected by provisions allowing reimbursement
for costs incurred as well as payment of any applicable fees or profits.
ENVIRONMENTAL MATTERS
Due primarily to Federal and State legislation which imposes liability,
regardless of fault, upon commercial product manufacturers for environmental
harm caused by chemicals, processes and practices that were commonly and
lawfully used prior to the enactment of such legislation, the Company may be
liable for all or a portion of the environmental clean-up costs at sites
previously owned or leased by the Company (or corporations acquired by the
Company). The Company's contingencies associated with environmental matters are
described in Note 11 of Notes to Consolidated Financial Statements included in
the Company's 1998 Annual Report on page 21 which is incorporated herein by
reference.
COMPETITION
The Company's businesses compete in some markets with entities that are
larger and have substantially greater financial and technical resources than the
Company. Generally, competitive factors include design capabilities, product
performance and delivery and price. The Company's ability to compete
successfully in such markets will depend on its ability to develop and apply
technological innovations and to expand its customer base and product lines. The
Company is successfully doing so both internally and through acquisitions. There
can be no assurance that the Company will continue to successfully compete in
any or all of the businesses discussed above. The failure of the Company to
compete in more than one of these businesses could have a material and adverse
effect on the Company's profitability.
RAW MATERIALS
The various components and raw materials used by the Company to produce
its products are generally available from more than one source. In those
instances where only a single source for any material is available, such items
can generally be redesigned to accommodate materials made by other suppliers. In
some
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cases, the Company stocks an adequate supply of the single source materials for
use until a new supplier can be approved. No material part of the Company's
business is dependent upon a single supplier or a few suppliers, the loss of
which would have a materially adverse effect on the Company's consolidated
financial position.
EMPLOYEES
As of May 29, 1998, the Company employed 1,614 persons. There were
1,416 employees associated with the Specialty Fastener Products segment, 175
with the Rescue Hoist and Cargo Hook Products segment and 23 with the corporate
office.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information relating to each of the Company's segments has
been included in Note 12 of Notes to Consolidated Financial Statements included
in the Company's 1998 Annual Report on pages 21-23 and is incorporated herein by
reference.
FOREIGN OPERATIONS AND SALES
The Company's foreign-based facilities during fiscal 1998 consisted of
the Seeger-Orbis and Pebra facilities located in Germany, the Anderton facility
located in the U.K., a sales office in Paris, France and the Seeger Reno
facility located in Brazil. The Company acquired all of these businesses on June
30, 1995, except for Pebra which was acquired on June 18, 1996. Additionally,
the Company had foreign-based facilities during fiscal 1996 that are treated as
discontinued operations as of March 31, 1996. The Company had foreign sales of
$57.2 million and $58 million in fiscal 1998 and 1997, respectively,
representing 28% and 32% of the Company's consolidated sales in each of those
years, respectively. The Company had export sales of $20.3 million, $19.8
million and $16.9 million in fiscal 1998, 1997 and 1996, respectively,
representing 10%, 11% and 11% of the Company's consolidated sales in each of
those years, respectively. The risk and profitability attendant to these sales
is generally comparable to similar products sold in the United States. Sales,
profits and identifiable assets attributable to the Company's foreign and
domestic operations, and the identification of export sales by geographic area,
are set forth in Note 12 of Notes to Consolidated Financial Statements in the
Company's 1998 Annual Report on pages 21-23 and is incorporated herein by
reference.
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ITEM 2. PROPERTIES
The following table sets forth certain information concerning the
Company's principal facilities for its continuing operations:
<TABLE>
<CAPTION>
Owned or
Location Use of Premises Leased Sq. Ft
<S> <C> <C> <C>
Liberty Corner, New Jersey Executive Offices Leased 13,000
SPECIALTY FASTENER
PRODUCTS SEGMENT
Saltsburg, Pennsylvania Breeze Industrial offices and Owned 105,000
manufacturing plant
Mountainside, New Jersey Palnut offices and manufacturing Owned 142,000
plant
Irvington, New Jersey Industrial Retaining Ring Owned 37,000
manufacturing plant
Somerset, New Jersey Seeger, Inc. offices Leased 104,000
and manufacturing plant
(Closure expected June 1998)
Southfield, Michigan Specialty Fastener Sales Office Leased 1,000
Konigstein, Germany Seeger Group offices and Owned 149,000
Seeger-Orbis manufacturing
plant
Minneapolis, Minnesota TCR Corporation offices Leased 137,000
and plant
Bingley, England Anderton offices and Owned 124,000
manufacturing plant
Sao Paulo, Brazil Seeger Reno offices and Owned 85,000
manufacturing plant
Paris, France Retaining Ring Sales Office Leased 500
Frittlingen, Germany Pebra offices and Owned 30,000
manufacturing plant
</TABLE>
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<TABLE>
<S> <C> <C> <C>
RESCUE HOIST AND CARGO HOOK
PRODUCTS SEGMENT
Union, New Jersey Breeze-Eastern offices Owned 188,000
and manufacturing plant
</TABLE>
The Company believes that such facilities are suitable and adequate for
the Company's foreseeable needs and that additional space, if necessary, will be
available. The Company continues to own or lease property that it no longer
needs in its operations. These properties are located in California,
Pennsylvania, New York and Illinois. In some instances, the properties are
leased or subleased and in nearly all instances these properties are for sale.
ITEM 3. LEGAL PROCEEDINGS
The information required has been included in Note 11 Notes to
Consolidated Financial Statements included in the Company's 1998 Annual Report
on page 21 and is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the three month period ended March 31, 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, par value $0.01, is traded on the New York
Stock Exchange under the symbol TT. The following table sets forth the range of
high and low closing sales prices on the New York Stock Exchange for the Common
Stock for the calendar quarters indicated, as reported by the New York Stock
Exchange.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal 1997
First Quarter $ 19-3/4 $ 14-7/8
Second Quarter 18-5/8 17-3/8
Third Quarter 19-7/8 18
Fourth Quarter 22-7/8 19-5/8
Fiscal 1998
First Quarter $ 22-7/8 $ 19-3/8
Second Quarter 26-11/16 22-3/4
Third Quarter 28-5/16 26
Fourth Quarter 30-5/16 25-1/2
Fiscal 1999
First Quarter $ 30-5/8 $ 26-1/2
(through May 29, 1998)
</TABLE>
As of May 29, 1998, the number of stockholders of record of the Common
Stock was 2,062. On May 29, 1998 the closing sales price of the Common Stock was
$27.00.
The Company's bank indebtedness permits quarterly dividend payments
which cannot exceed 25% of the Company's cumulative net income in each year. The
Company paid a regular quarterly dividend of $0.065 per share on June 1,
September 1 and December 1, 1996, March 1, June 2, September 1 and December 1,
1997 and March 2, 1998.
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ITEM 6. SELECTED FINANCIAL DATA
The information required has been included in the Company's 1998 Annual
Report on page 1 and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required has been included in the Company's 1998 Annual
Report on pages 25-30 and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements: The information required has been included in the
Company's 1998 Annual Report on pages 9-30 and is incorporated herein
by reference.
Quarterly Financial Data: The information required has been included in
Note 13 of Notes to Consolidated Financial Statements in the Company's
1998 Annual Report on page 23 and is incorporated herein by reference.
Financial Statement Schedules:
Schedule II --
Consolidated Valuation and Qualifying Accounts for years ended
March 31, 1998, 1997 and 1996.
Schedules required by Article 5 of Regulation S-X, other than
those listed above, are omitted because of the absence of the
conditions under which they are required.
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INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the financial statements of TransTechnology Corporation as of
March 31, 1998 and 1997, and for each of the three years in the period ended
March 31, 1998, and have issued our report thereon dated May 12, 1998; such
financial statements and report are included in your 1998 Annual Report and are
incorporated herein by reference. Our audits also included the financial
statement schedule of TransTechnology Corporation, listed in Item 14. This
financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
May 12, 1998
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ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
The New Seeger Group:
We have audited the accompanying combined balance sheet in U.S. dollars of The
New Seeger Group (as defined in Notes 1 and 3) as of March 31, 1996, and the
related combined statements of income, shareholders' equity and cash flows for
the period July 1, 1995 through March 31, 1996 which, as described in Note 3,
have been prepared on the basis of accounting principles generally accepted in
the United States. These financial statements are the responsibility of The New
Seeger Group's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements in U.S. dollars referred to
above present fairly, in all material respects, the financial position of The
New Seeger Group as of March 31, 1996, and the results of their operations and
their cash flows for the period July 1, 1995 through March 31, 1996, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
/s/ Laupenmuhlen /s/ Kugler
Laupenmuhlen Kugler
Wirtschaftsprufer Wirtschaftsprufer
(certified auditor) (certified auditor)
Eschborn/Frankfurt/M.
May 28, 1996
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TRANSTECHNOLOGY CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
<S> <C> <C> <C> <C> <C>
1998
Allowances for
doubtful accounts
and sales returns $ 588 $ 537 $ 20(A) $ 589 $ 556
1997
Allowances for
doubtful accounts
and sales returns $ 735 $ 139 $ 246 $ 532 $ 588
1996
Allowances for
doubtful accounts
and sales returns $ 103 $ 468 $ 382(B) $ 218 (B) $ 735
</TABLE>
(A) Amount represents balance acquired from TCR Corporation acquisition.
(B) Amount represents balance acquired from Seeger acquisition.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is contained in the Company's
Proxy Statement for the year ended March 31, 1998 and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is contained in the Company's
Proxy Statement for the year ended March 31, 1998 and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained in the Company's
Proxy Statement for the year ended March 31, 1998 and is incorporated herein by
reference.
For purposes of the calculation of the aggregate market value of voting
stock held by non-affiliates, the Company has assumed that the shares of Common
Stock beneficially owned by Dr. Arch C. Scurlock are not held by an affiliate of
the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained in the Company's
Proxy Statement for the year ended March 31, 1998 and is incorporated herein by
reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of the Annual Report:
1. Financial Statements:
Consolidated Balance Sheets at March 31, 1998 and 1997
Statements of Consolidated Operations for the years ended
March 31, 1998, 1997 and 1996
Statements of Consolidated Cash Flows for the years ended
March 31, 1998, 1997 and 1996
Statements of Consolidated Stockholders' Equity for the years
ended March 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules:
Schedule II - Consolidated Valuation and Qualifying Accounts
for the years ended March 31, 1998, 1997 and 1996
3. Exhibits:
The exhibits listed on the accompanying Index to Exhibits are
filed as part of this report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three-month
period ended March 31, 1998.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: June 15, 1998
TRANSTECHNOLOGY CORPORATION
By: /s/Michael J. Berthelot
Michael J. Berthelot,
Chairman of the Board
and Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Michael J. Berthelot Chairman of the Board June 15, 1998
MICHAEL J. BERTHELOT and Chief Executive Officer
(Principal Executive Officer)
/s/Patrick K. Bolger President, Chief Operating Officer June 15, 1998
PATRICK K. BOLGER and Director
/s/Joseph F. Spanier Vice President, Chief Financial Officer June 15, 1998
JOSEPH F. SPANIER and Treasurer
(Principal Financial and Accounting Officer)
/s/Walter Belleville Director June 15, 1998
WALTER BELLEVILLE
/s/Gideon Argov Director June 15, 1998
GIDEON ARGOV
/s/Thomas V. Chema Director June 15, 1998
THOMAS V. CHEMA
/s/James A. Lawrence Director June 15, 1998
JAMES A. LAWRENCE
/s/Michel Glouchevitch Director June 15, 1998
MICHEL GLOUCHEVITCH
/s/William J. Recker Director June 15, 1998
WILLIAM J. RECKER
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
<S> <C> <C>
3.1 Certificate of Incorporation of the Company.(1) --
3.2 Bylaws of the Company Amended and Restated as of October 17, 1997.(11) --
10.1 1996 - 1998 Incentive Compensation Plan of the Company.(10) --
10.2 Amended and Restated 1992 Long Term Incentive Plan of the Company.(2) --
10.3 Form of Incentive Stock Option Agreement.(2) --
10.4 Form of Director Stock Option Agreement.(3) --
10.5 Form of Restricted Stock Award Agreement used under the Company's Amended and
Restated 1992 Long Term Incentive Plan.(4) --
10.6 Indemnification Agreement dated February 11, 1987 between the Company and each of
its officers and directors.(5) --
10.7 Executive Life Insurance Plan.(6) --
10.8 Revolving Credit and Loan Agreement dated as of June 30, 1995 between the
Company and the First National Bank of Boston.(7) --
10.9 First Amendment to the Revolving Credit and Loan Agreement dated as of August 29, 1995
between the Company and the First National Bank of Boston.(8) --
10.10 Second Amendment to the Revolving Credit and Loan Agreement dated as of October 27, 1995
between the Company and the First National Bank of Boston.(8) --
10.11 Third Amendment to the Revolving Credit and Loan Agreement dated as of March 29, 1996
between the Company and the First National Bank of Boston.(8) --
10.12 Fourth Amendment to the Revolving Credit and Loan Agreement dated as of December 31, 1996
between the Company and the First National Bank of Boston.(10) --
10.13 Fifth Amendment to the Revolving Credit and Loan Agreement dated as of March 31, 1997
between the Company and the First National Bank of Boston.(9) --
10.14 Form of Executive Severance Agreement with Officers of the Company.(10) --
10.15 Form of Executive Severance Agreement with Subsidiary Presidents.(10) --
10.16 Form of Executive Severance Agreement with Division Presidents.(10) --
10.17 Form of Executive Severance Agreement with Overseas Subsidiary Managing Directors.(10) --
13 The Company's 1998 Annual Report. --
21 List of Subsidiaries of the Company. --
27 Financial Data Schedule. --
- ----------------------
(1) Incorporated by reference from the Company's Form 8-A Registration
Statement No. 2-85599 dated February 9, 1987. --
</TABLE>
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<TABLE>
<S> <C> <C>
(2) Incorporated by reference from the Company's Registration Statement on
Form S-8 No. 333-45059 dated January 28, 1998. --
(3) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1995. --
(4) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1994. --
(5) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1987. --
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1989. --
(7) Incorporated by reference from the Company's Report on Form 8-K
filed on July 14, 1995. --
(8) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1996. --
(9) Incorporated by reference from the Company's Report on Form 8-K
filed on April 29, 1997. --
(10) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1997. --
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended December 28, 1997. --
</TABLE>
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[LOGO] TRANSTECHNOLOGY CORPORATION
engineered products for global partners (TM)
[PHOTO]
ANNUAL REPORT
Fiscal Year Ended March 31, 1998
<PAGE> 2
TABLE OF CONTENTS:
1 SELECTED FINANCIAL DATA
2 LETTER TO SHAREHOLDERS
4 DOMESTIC AND INTERNATIONAL INDUSTRIAL PRODUCTS
6 AEROSPACE PRODUCTS
9 FINANCIAL INFORMATION
[4 BAR GRAPHS]
NET SALES
($ in Millions)
1994 81.9
1995 101.1
1996 158.0
1997 178.7
1998 204.0
INCOME FROM
CONTINUING
OPERATIONS
($ in Millions)
1994 5.8
1995 7.4
1996 8.5
1997 9.7
1998 12.0
DILUTED INCOME PER SHARE
FROM CONTINUING
OPERATIONS
(in Dollars)
1994 1.12
1995 1.44
1996 1.66
1997 1.87
1998 2.11
CAPITAL EXPENDITURES
($ in Millions)
1994 5.0
1995 5.0
1996 6.5
1997 5.5
1998 8.7
INVESTOR RELATIONS CONTACT
Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
TransTechnology Corporation
150 Allen Road
Liberty Corner, New Jersey 07938
908/903-1600
ANNUAL MEETING
The Annual Shareholders' Meeting will be held on Thursday, July 23, 1998 at the
Somerset Hills Hotel, 200 Liberty Corner, Warren, New Jersey 07059.
FORM 10-K AND ADDITIONAL INFORMATION
The Company, upon request to the Investor Relations department, will provide to
any shareholder a copy of the Form 10-K required to be filed with the Securities
and Exchange Commission and any other available information.
<PAGE> 3
SELECTED FINANCIAL DATA
The following table provides selected financial data with respect to the
consolidated statements of operations of the Company for the fiscal years ended
March 31, 1998, 1997, 1996, 1995 and 1994 and the consolidated balance sheets of
the Company at the end of each such period.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA YEARS ENDED MARCH 31,
(In thousands, except per share amounts) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 203,928 $ 178,684 $ 158,024 $ 101,122 $ 81,873
- ---------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 20,153 16,620 14,300 10,842 8,860
Provision for income taxes 8,162 6,898 5,792 3,457 3,060
- ---------------------------------------------------------------------------------------------------------
Income from continuing operations 11,991 9,722 8,508 7,385 5,800
Income (loss) from discontinued operations (924) (934) (1,134) (4,852) 1,084
- ---------------------------------------------------------------------------------------------------------
Net income $ 11,067 $ 8,788 $ 7,374 $ 2,533 $ 6,884
- ---------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Basic:
Income from continuing operations $ 2.17 $ 1.92 $ 1.67 $ 1.45 $ 1.13
Income (loss) from discontinued
operations (0.17) (0.18) (0.22) (0.95) 0.21
- ---------------------------------------------------------------------------------------------------------
Net income per share $ 2.00 $ 1.74 $ 1.45 $ 0.50 $ 1.34
- ---------------------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations $ 2.11 $ 1.87 $ 1.66 $ 1.44 $ 1.12
Income (loss) from discontinued
operations (0.16) (0.18) (0.22) (0.95) 0.21
- ---------------------------------------------------------------------------------------------------------
Net income per share $ 1.95 $ 1.69 $ 1.44 $ 0.49 $ 1.33
- ---------------------------------------------------------------------------------------------------------
Dividends declared and paid per share $ 0.26 $ 0.26 $ 0.26 $ 0.255 $ 0.24
- ---------------------------------------------------------------------------------------------------------
Total assets $ 236,073 $ 199,136 $ 199,367 $ 129,396 $125,857
Long-term debt $ 51,350 $ 67,516 $ 72,565 $ 37,021 $ 33,168
Stockholders' equity $ 115,832 $ 77,444 $ 72,470 $ 64,502 $ 65,953
Book value per share $ 18.47 $ 15.40 $ 14.21 $ 12.72 $ 12.71
Shares outstanding at year-end 6,272 5,028 5,099 5,070 5,189
- ---------------------------------------------------------------------------------------------------------
</TABLE>
MARKET AND DIVIDEND DATA
<TABLE>
<CAPTION>
MARKET PRICE
------------------------------------------------------
QUARTER ENDED HIGH LOW DIVIDENDS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
June 30, 1996 $ 19-3/4 $ 14-7/8 $ .065
September 30, 1996 18-5/8 17-3/8 .065
December 31, 1996 19-7/8 18 .065
March 31, 1997 22-7/8 19-5/8 .065
- ---------------------------------------------------------------------------------------------------------
June 30, 1997 22-7/8 19-7/8 .065
September 30, 1997 26-11/16 22-3/4 .065
December 31, 1997 28-5/16 26 .065
March 31, 1998 30-5/16 25-1/2 .065
- ---------------------------------------------------------------------------------------------------------
</TABLE>
TRANSTECHNOLOGY CORPORATION
1
<PAGE> 4
[PHOTO] MICHAEL J. BERTHELOT
FELLOW SHAREHOLDERS:
We are pleased to report that the fiscal year ended March 31, 1998 was the sixth
consecutive year of growth for our Company, with revenues up 14%, income from
continuing operations up 23%, and earnings per share up 13%. During fiscal 1998,
our share price reached a ten year high and approached its all-time peak as we
made significant progress toward achieving our financial and operating goals. We
improved the profitability of our enterprises, completed an acquisition,
strengthened our balance sheet and management structure, and planned for the
future. It was, quite simply, a rewarding and successful year.
The April 1997 acquisition of TCR Corporation, which manufactures specialty
cold headed and screw machined products in Minneapolis, added another product
line to our range of industrial component parts as well as a highly profitable
and rapidly growing business. TCR made a solid contribution to fiscal 1998's
results, and is poised to be a source of continued growth and contribution in
the future.
We also paid close attention to the operations already within our fold during
fiscal 1998. We completed the closing of our Eichen, Germany, retaining ring
facility, moving most of the work to our UK operation. We commenced the closure
of our Somerset, New Jersey, retaining ring factory, with all of its
manufacturing operations relocating to our Irvington, New Jersey, location, a
process we anticipate completing in June, 1998. New division management teams
were installed at several manufacturing facilities where results in the previous
years failed to meet our expectations. Substantial capital expenditure projects,
to reduce operating costs, improve productivity, and expand capacity, were begun
at several of our divisions. Our philosophy towards our business is that if we
do not take good care of those enterprises we already have in hand, it makes
little sense to acquire more. We believe that the changes we have made in fiscal
1998 will give us the efficiency to improve operating income in fiscal 1999, and
the capacity to produce solid revenue gains in fiscal 2000.
One of the highlights of the past fiscal year was the successful sale of
1,154,000 shares of stock in November, 1997, at a price $1 per share higher than
its price on the date the offering was announced. During fiscal 1998 we achieved
a major internal goal when our Breeze Industrial, Breeze Eastern, and Seeger
Orbis divisions each received ISO-9000 certification, joining Anderton and
Seeger Reno which already held that certification. During the past year, our
Seeger Reno and Palnut divisions have also received the coveted, and difficult
to obtain, QS9000 certification which is mandatory in order to supply the
domestic automotive industry.
In the fourth quarter of fiscal 1998, we also bolstered the base for the
future management of the company by reorganizing to more accurately reflect our
approach to the markets served and to narrow the range of management
responsibility. We believe the new structure will enable a clearer focus on
current operations while simultaneously providing a management framework
designed to allow a more aggressive acquisition pace in the future. With the
appointment of Robert Tunno as President of Domestic Industrial Products, UIf
Jemsby as President of International Industrial Products, and Robert White as
President of Aerospace Products, our management team is set to continue growth
through acquisitions in all of our geographic and product-line markets. An
enhanced executive development and succession planning program, which began in
fiscal 1998, is designed to provide the company with the management depth it
will need in the future while broadening the career and personal growth
opportunities for our best people.
We enter fiscal 1999 with many projects on our plate, each closely linked to
our financial and operating goals of $500 million in revenues, a 7% net income
margin, 15% return on equity, 15% annual EPS growth, 35% debt to total
capitalization, and a number one or two
TRANSTECHNOLOGY CORPORATION
2
<PAGE> 5
global market share position in each of our product lines. Our primary fiscal
1999 operating objective is to successfully complete the consolidation of our
domestic retaining ring operation in New Jersey. Close behind, however, are the
rejuvenation of our assembly fastener business and our UK retaining ring
business, as well as the implementation of major capital projects in our hose
clamp and German retaining ring operations. The economies of our geographic
markets are strong today and are expected to continue to strengthen in fiscal
1999, especially Germany. Our end user markets, although growing slowly, also
remain strong. By maximizing the efficiency of our existing operations, we are
trying to position ourselves not only to minimize our downside in the event of a
slowdown, but to gain market share in strengthening markets. We expect fiscal
1999 to be a year of "project completions" in our various operations, with
substantial improvement to the bottom line anticipated. As the results of these
projects fall into place, we look for increasing growth in fiscal 2000.
In the first quarter of fiscal 1999, TransTechnology developed and put
forward to the commercial marketplace a unified image. Our newly designed logo
and modernized typeface, a companywide style manual, a multi-divisional trade
show booth, and a first ever corporate advertising campaign, are all designed to
put the energy and resources of the world-wide TransTechnology organization
before our customers. In conjunction with this project, we have undertaken a
global survey of our customers and employees, in order to determine our current
perception and to learn how we can better serve both groups. Our over-riding
goal is to be known by our current and future customers as the company that is
dedicated to engineered products for global partners.
We also expect to pick up the pace of our acquisition program in fiscal 1999.
In fiscal 1998, we felt it did not make sense to aggressively pursue
acquisitions while addressing so many internal challenges. In fiscal 1999,
however, with the solutions to those problems believed to be in place, we expect
to return to the focused acquisition mode from which much of our previous growth
has come. We believe that, with the restructuring of our management team, we are
now positioned to be able to integrate at least one acquisition in each of our
three Groups in fiscal 1999. With our March 31, 1998 debt level at our 35% goal,
we have the balance sheet to finance these acquisitions, and the management team
and disciplined process in place to properly integrate them.
Fiscal 1999 will begin a new chapter in the management of the company, as we
say thank you and Godspeed to three valued members of our management team who
will retire. On June 30, Pat Bolger, a director and our President and Chief
Operating Officer, and a man who has taught me much, will retire after more than
eight years with the Company. In September we will bid a fond farewell to
Chandler Moisen, who has served as our Chief Financial Officer and Executive
Vice President (and troubleshooter) for seven years. And, in December 1998, Joao
Scivoletto, President of our Seeger Reno operation in Brazil, will retire,
concluding a 35-year career that began with SKF, the previous owner of Seeger
Reno. We thank each of these gentlemen for their years of service to our
Company, and wish them long and happy retirements. We will miss them.
We look to fiscal 1999 with a continuing sense of hope, excitement, and
challenge. There is much to do, and many obstacles, opportunities, and risks lie
before us. I believe that our people, at every level, are up to the challenge of
continuing to transform TransTechnology into a premier organization for our
customers, employees, and shareholders.
It is truly an honor for me to serve as the leader of an organization as fine
as TransTechnology. I appreciate the dedication and hard work of each of our
over 1,600 employees worldwide. I am thankful to have a strong and involved
Board of Directors, who are a never-ending resource of advice and counsel. I am
committed, along with the entire management team, to meeting the obligations to
and expectations of our shareholders, who have placed their trust, confidence,
and financial resources with us. We thank each of you for your support this past
year, and look forward to continuing growth in the future.
/s/MICHAEL J. BERTHELOT
- -----------------------
MICHAEL J. BERTHELOT
Chairman and
Chief Executive Officer
TRANSTECHNOLOGY CORPORATION
3
<PAGE> 6
[PHOTO]
SEEGER
BORE USED IN GEARBOXES
[PHOTO]
BREEZE INDUSTRIAL
V-BAND
DOMESTIC AND INTERNATIONAL INDUSTRIAL PRODUCTS
TransTechnology Corporation derives over 80% of its revenues from the
manufacture and sale of specialty fasteners, and is the seventh largest fastener
manufacturer in the United States. Operating in small niches within the $8
billion domestic and $30 billion global fastener markets, the company operates
under some of the most well known brand names in the world and is an
acknowledged market leader in each of its product lines. The company's specialty
fastener products are used in a myriad of industries, ranging from automotive
and heavy truck manufacturing to computer disk drives, toys, cameras, appliances
and plumbing applications. Specialty fastener products are distributed through
in-house sales forces, distributors, and manufacturers' representatives around
the world. Through increased engineering and marketing resources, the company
continues to search for new applications for its products in new industries
throughout the globe.
[PIE CHART]
1998 Consolidated Sales
Allocation by Market Type
Consumer/Durables 3%
Industrial/Machinery 9%
Aerospace 17%
Heavy Truck OEM 21%
Automotive OEM 22%
Distribution 28%
RETAINING RINGS
TransTechnology is the world's largest manufacturer of retaining rings, with
operations in the United States, Germany, England, and Brazil selling products
under the brand names "SEEGER-ORBIS" (Germany), "SEEGER-RENO" (Brazil),
"ANDERTON" (United Kingdom), and "WALDES/TRUARC/IRR" (United States). Retaining
rings are highly engineered, usually to a customer's exacting specifications,
and are used in transmissions, drive trains, and braking systems on automobiles,
trucks, and off-road equipment. They also find application in industrial
equipment, computers, photographic equipment, marine applications, and almost
any situation where movement on a shaft must be restricted.
GEAR DRIVEN BAND FASTENERS
TransTechnology, through its BREEZE INDUSTRIAL PRODUCTS and PEBRA divisions, is
the only full-line manufacturer of gear driven band clamps in the world.
Breeze(R) and Pebra stainless steel clamps are well known for their quality and
engineering. Breeze(R) T-Bolt and Constant Torque(R) clamp products are used in
diesel engine, heavy truck, marine and off-road equipment applications
throughout the world. Breeze is a certified supplier to Caterpillar, Paccar, and
many other heavy equipment manufacturers. Breeze "Aero-Seal(R)", "Euro-Seal(R)"
and "Power-Seal(R)" clamps are found in hardware, automotive and retail stores
for use in repair, maintenance and overhaul applications, and are used by many
manufacturers of industrial and consumer products. Pebra brand clamps are used
primarily by European heavy truck and industrial product manufacturers.
TRANSTECHNOLOGY CORPORATION
4
<PAGE> 7
ASSEMBLY FASTENERS
TransTechnology's PALNUT division is one of the leading manufacturers of
assembly fasteners in the United States, supplying Palnut(R) highly engineered
custom fastening devices primarily to the automotive industry. Lock nuts,
push-nuts, u-nuts, and a variety of single and multi-threaded stainless and
high-carbon steel fasteners are provided to the toy, appliance, and lighting
industries for use in assembling products.
EXTERNALLY THREADED AND SPECIALTY MACHINED PRODUCTS
TCR CORPORATION, acquired in April 1997, designs and manufactures sophisticated
externally threaded fastening devices and custom industrial components,
combining its expertise in cold forging and machining technologies. TCR products
are used by industrial customers worldwide, with key market groups including the
automotive, hydraulic and recreational product industries.
[PIE CHART]
1998 FASTENER SALES
ALLOCATION BY MARKET TYPE
Consumer/Durables 4%
Industrial Machinery 11%
Heavy Truck OEM 26%
Automotive OEM 26%
Distribution 33%
[PHOTO]
THE PALNUT COMPANY
NICKEL PLATED PUSHNUT AND COPPER COVERED LOCKNUT
[PHOTO]
TCR
FLUID POWER HYDRAULIC SPOOL VALVE
TRANSTECHNOLOGY CORPORATION
5
<PAGE> 8
BREEZE-EASTERN
MISSION EQUIPMENT FOR THE
BELL BOEING V-22 OSPREY
TILT-ROTOR AIRCRAFT:
[PHOTO]
CARGO HOOK (TWO PER AIRCRAFT)
[PHOTO]
CARGO WINCH
[PHOTO]
RESCUE HOIST
Aerospace Products
TransTechnology's BREEZE-EASTERN division is the world's leading designer and
manufacturer of sophisticated helicopter rescue hoists and cargo hook systems.
These complex, highly engineered systems add significantly to the versatility of
an aircraft for a relatively small cost. The equipment is used around the world
by military and civilian agencies to save lives, complete missions, and
transport cargo. Most helicopter manufacturers today, including Agusta, Bell,
Boeing, Eurocopter, Sikorsky, and Westland specify Breeze-Eastern's systems as
standard equipment on their aircraft because of Breeze-Eastern's record for
safety, reliability, durability, and service. Innovation and new product
development remain an important focus at Breeze-Eastern, one reason why its
products will be found on the new V-22 Osprey vertical take-off and landing
aircraft due into production in 1999 for the U.S. Marine Corps and the U.S. Army
UH-60Q Blackhawk MEDEVAC Helicopter. Breeze-Eastern also designs and
manufactures handling systems for weapons platforms and motion control
actuation devices for civilian and military aircraft.
[PIE CHART]
1998 Consolidated Sales
Domestic vs. International Operations
International 28%
Domestic 72%
TRANSTECHNOLOGY CORPORATION
6
<PAGE> 9
[PHOTO]
BELL BOEING V-22 OSPREY TILT-ROTOR AIRCRAFT
[PHOTO]
[PHOTO]
[PHOTO]
[PHOTO]
7
<PAGE> 10
Board of Directors and Corporate Officers
[PHOTO]
BOARD OF DIRECTORS
Back row, from left to right: James A. Lawrence, Gideon Argov,
Michel Glouchevitch, Walter Belleville
Front row: Patrick K. Bolger, Thomas V. Chema,
Michael J. Berthelot, William J. Recker
[PHOTO]
CORPORATE OFFICERS
Back row, from left to right: Robert L.G. White, President Aerospace Products
Group; Robert Tunno, President Domestic Industrial Products Group; Monica
Aguirre, Assistant Secretary; Ulf Jemsby, President International Industrial
Products Group; Gerald C. Harvey, VP, Secretary and General Counsel
Front row: Chandler J. Moisen, Executive VP; Patrick K. Bolger, President and
COO; Michael J. Berthelot, Chairman and CEO; Joseph F. Spanier, VP, CFO and
Treasurer
TRANSTECHNOLOGY CORPORATION
8
<PAGE> 11
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1998 1997
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,960 $ 3,540
Accounts receivable (net of allowance for doubtful accounts of
$556 and $588 in 1998 and 1997, respectively) 33,244 28,392
Notes and other receivables 5,086 1,838
Inventories 53,985 50,677
Prepaid expenses and other current assets 1,022 1,028
Deferred income taxes 2,773 4,293
Assets held for sale 5,442 7,617
--------- ---------
Total current assets 104,512 97,385
--------- ---------
PROPERTY:
Land 11,002 12,272
Buildings 19,747 20,636
Machinery and equipment 54,315 42,760
Furniture and fixtures 7,381 6,349
Leasehold improvements 536 190
--------- ---------
Total 92,981 82,207
Less accumulated depreciation and amortization 29,295 23,594
--------- ---------
Property - net 63,686 58,613
--------- ---------
OTHER ASSETS:
Notes receivable 7,181 11,125
Costs in excess of net assets of acquired businesses (net of
accumulated amortization of $5,115 and $3,869 in 1998 and
1997, respectively) 45,094 18,878
Other 15,600 13,135
--------- ---------
Total other assets 67,875 43,138
--------- ---------
TOTAL $ 236,073 $ 199,136
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------- ---------
CURRENT LIABILITIES:
Current portion of long-term debt $ 12,137 $ 5,907
Accounts payable - trade 14,694 11,050
Accrued compensation 9,764 6,845
Accrued income taxes 332 1,632
Other current liabilities 11,154 12,844
--------- ---------
Total current liabilities 48,081 38,278
--------- ---------
LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS 51,350 67,516
--------- ---------
OTHER LONG-TERM LIABILITIES 20,810 15,898
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 300,000 shares; none issued
Common stock - authorized, 14,700,000 shares of $.01 par value; issued,
6,564,079 and 5,316,971 shares in 1998 and 1997, respectively 66 53
Additional paid-in capital 75,959 46,745
Retained earnings 46,537 36,937
Other stockholders' equity (2,731) (2,352)
--------- ---------
119,831 81,383
Less treasury stock, at cost - 292,054 and 289,237 shares in 1998 and 1997, respectively (3,999) (3,939)
--------- ---------
Total stockholders' equity 115,832 77,444
--------- ---------
TOTAL $ 236,073 $ 199,136
--------- ---------
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
9
<PAGE> 12
Statements of Consolidated Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 203,928 $ 178,684 $ 158,024
Cost of sales 137,820 122,480 107,426
----------- ----------- -----------
Gross profit 66,108 56,204 50,598
General, administrative and selling expenses 40,187 35,309 31,812
Interest expense 7,228 6,797 6,316
Interest income (1,020) (1,202) (1,010)
Royalty and other income (440) (1,320) (820)
----------- ----------- -----------
Income from continuing operations before
income taxes 20,153 16,620 14,300
Provision for income taxes 8,162 6,898 5,792
----------- ----------- -----------
Income from continuing operations 11,991 9,722 8,508
Discontinued operations:
Loss from operations (net of applicable
tax benefit of $323 for 1996) -- -- (517)
Loss from disposal (net of applicable tax
benefits of $1,301, $663 and $1,077
for 1998, 1997 and 1996, respectively) (924) (934) (617)
----------- ----------- -----------
Net income $ 11,067 $ 8,788 $ 7,374
----------- ----------- -----------
Earnings (loss) per share:
Basic:
Income from continuing operations $ 2.17 $ 1.92 $ 1.67
Loss from discontinued operations (0.17) (0.18) (0.22)
----------- ----------- -----------
Net income per share $ 2.00 $ 1.74 $ 1.45
----------- ----------- -----------
Diluted:
Income from continuing operations $ 2.11 $ 1.87 $ 1.66
Loss from discontinued operations (0.16) (0.18) (0.22)
----------- ----------- -----------
Net income per share $ 1.95 $ 1.69 $ 1.44
----------- ----------- -----------
Weighted-average basic shares outstanding 5,520,000 5,064,000 5,093,000
Weighted-average diluted shares outstanding 5,689,000 5,196,000 5,134,000
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
10
<PAGE> 13
Statements of Consolidated Cash Flows
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,067 $ 8,788 $ 7,374
Adjustments to reconcile net income to net cash provided by
operating activities:
Loss recognized on write-down of marketable securities -- -- 2,613
Depreciation and amortization 9,054 7,406 6,027
Provision for losses on accounts receivable 537 139 468
Loss (gain) on sale or disposal of fixed assets and discontinued
businesses 1,087 64 (307)
Changes in assets and liabilities - excluding the effects of
acquisitions and dispositions:
(Increase) decrease in accounts receivable (2,732) (620) 4,290
(Increase) decrease in inventories (2,685) 191 (6,098)
Decrease (increase) in assets held for sale 836 262 (1,915)
(Increase) decrease in other assets (4,166) (453) 4,825
Increase (decrease) in accounts payable 1,770 (3,650) 462
Increase in accrued compensation 2,989 553 2,226
(Decrease) increase in income taxes payable (1,300) 242 (676)
Increase (decrease) in other liabilities 2,751 1,385 (8,577)
--------- --------- ---------
Net cash provided by operating activities 19,208 14,307 10,712
--------- --------- ---------
Cash flows from investing activities:
Business acquisitions (34,774) (3,602) (45,594)
Capital expenditures (8,745) (5,477) (6,471)
Proceeds from sale of fixed assets and discontinued businesses 2,144 2,705 8,111
Decrease in notes and other receivables 1,954 1,119 1,055
--------- --------- ---------
Net cash used in investing activities (39,421) (5,255) (42,899)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term borrowings 68,400 40,105 107,363
Payments on long-term debt (78,336) (45,273) (73,156)
Proceeds from issuance of stock under stock option plan 2,213 365 188
Stock offering proceeds 26,908 -- --
Proceeds from foreign exchange contracts 2,036 -- --
Treasury stock purchases -- (1,625) (65)
Dividends paid (1,467) (1,318) (1,325)
--------- --------- ---------
Net cash provided by (used in) financing activities 19,754 (7,746) 33,005
--------- --------- ---------
Effect of exchange rate changes on cash (121) (128) --
(Decrease) increase in cash and cash equivalents (580) 1,178 818
Cash and cash equivalents at beginning of year 3,540 2,362 1,544
--------- --------- ---------
Cash and cash equivalents at end of year $ 2,960 $ 3,540 $ 2,362
--------- --------- ---------
Supplemental information:
Interest payments $ 7,647 $ 6,708 $ 6,529
Income tax payments $ 5,988 $ 3,810 $ 2,703
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
11
<PAGE> 14
Statements of Consolidated Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
YEARS ENDED COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
MARCH 31, 1998, --------------------- ---------------------- PAID-IN RETAINED STOCKHOLDERS'
1997 AND 1996 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
--------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 5,242,316 $ 52 (172,500) $ (2,090) $ 45,802 $ 23,418 $ (2,680) $ 64,502
Net income -- -- -- -- -- 7,374 -- 7,374
Cash dividends ($.26 per
share) -- -- -- -- -- (1,325) -- (1,325)
Purchase of treasury stock -- -- (5,000) (65) -- -- -- (65)
Issuance of stock under
stock option plan 20,308 1 -- -- 187 -- -- 188
Issuance of stock under
incentive bonus plan - net 13,839 -- -- -- 199 -- (122) 77
Foreign currency translation
adjustments -- -- -- -- -- -- (894) (894)
Realized investment
holding losses -- -- -- -- -- -- 2,613 2,613
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1996 5,276,463 53 (177,500) (2,155) 46,188 29,467 (1,083) 72,470
========= ========= ========= ========= ========= ========= ========= =========
Net income -- -- -- -- -- 8,788 -- 8,788
Cash dividends ($.26 per
share) -- -- -- -- -- (1,318) -- (1,318)
Purchase of treasury stock -- -- (100,000) (1,625) -- -- -- (1,625)
Issuance of stock under
stock option plan 30,381 -- -- -- 365 -- -- 365
Issuance of stock under
incentive bonus plan - net 10,127 -- (11,737) (159) 192 -- 75 108
Foreign currency translation
adjustments -- -- -- -- -- -- (1,061) (1,061)
Unrealized investment
holding losses -- -- -- -- -- -- (283) (283)
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1997 5,316,971 53 (289,237) (3,939) 46,745 36,937 (2,352) 77,444
========= ========= ========= ========= ========= ========= ========= =========
Net income -- -- -- -- -- 11,067 -- 11,067
Cash dividends ($.26 per
share) -- -- -- -- -- (1,467) -- (1,467)
Public sale of common stock,
net of expenses 1,063,900 11 -- -- 26,897 -- -- 26,908
Issuance of stock under
stock option plan 178,416 2 -- -- 2,211 -- -- 2,213
Issuance of stock under
incentive bonus plan - net 4,792 -- (2,817) (60) 106 -- (2) 44
Foreign currency translation
adjustments -- -- -- -- -- -- (487) (487)
Unrealized investment
holding gains -- -- -- -- -- -- 110 110
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1998 6,564,079 $ 66 (292,054) $ (3,999) $ 75,959 $ 46,537 $ (2,731) $ 115,832
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
TRANSTECHNOLOGY CORPORATION
12
<PAGE> 15
Notes to Consolidated Financial Statements
1. SUMMARY OF ACCOUNTING PRINCIPLES
BUSINESS - TransTechnology Corporation (the "Company") develops, manufactures
and sells a wide range of products in two industry segments, Specialty Fastener
Products and Rescue Hoist and Cargo Hook Products. The Company has manufacturing
facilities located in the United States, Germany, the United Kingdom and Brazil.
The Specialty Fastener Products Segment produces highly engineered precision
metal retaining rings, gear driven band fasteners, circlips, custom cold forged
parts and other threaded and non-threaded assembly fasteners primarily for the
automotive, heavy truck, industrial and consumer/durables markets. This segment
accounted for approximately 83% of the Company's consolidated 1998 net sales.
Through its Rescue Hoist and Cargo Hook Products Segment, the Company develops,
manufactures, sells and services a complete line of sophisticated lifting and
restraining products - principally performance critical helicopter rescue hoist
and cargo hook systems, and winches and hoists for aircraft and weapons systems.
This segment accounted for approximately 17% of the Company's consolidated 1998
net sales.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in its consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of TransTechnology Corporation and its subsidiaries, all of
which are wholly-owned. Intercompany balances and transactions are eliminated in
consolidation.
ACCOUNTING FOR CONTRACTS - All of the Company's contracts are firm fixed-price.
Sales and cost of sales on such contracts are recorded as deliveries are made.
Accounts receivable from the United States Government represent billed
receivables and substantially all amounts are expected to be collected within
one year. Losses on contracts are recorded as they are identified.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with a maturity at date of acquisition of three months or less to be cash
equivalents.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Cost includes material, labor
and manufacturing overhead costs.
PROPERTY AND RELATED DEPRECIATION AND AMORTIZATION - Property is recorded at
cost. Provisions for depreciation are made on a straight-line basis over the
estimated useful lives of depreciable assets ranging from three to thirty years.
Amortization of leasehold improvements is computed on a straight-line basis over
the shorter of the estimated useful lives of the improvements or the terms of
the leases. The Company reviews property and equipment and assets held for sale
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. It has been determined that
no impairment loss needs to be recognized for such assets.
COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES - The difference between
the purchase price and the fair value of the net assets of acquired businesses
is being amortized over 40 years, or shorter periods where deemed appropriate.
The Company has determined that there is no impairment in value since projected
future operating results on an undiscounted basis, through the period such costs
in excess of net assets of acquired businesses are being amortized, are expected
to be sufficient to absorb the amortization.
TRANSTECHNOLOGY CORPORATION
13
<PAGE> 16
EARNINGS PER SHARE - The computation of basic earnings per share is based on the
weighted-average number of common shares outstanding. The computation of diluted
earnings per share assumes the foregoing and, in addition, the exercise of all
stock options using the treasury stock method.
All period earnings per share figures presented herein have been calculated in
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 128, Earnings Per Share. The components of the denominator for
basic earnings per common share and diluted earnings per common share are
reconciled as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Basic earnings per common share:
Weighted-average common
shares outstanding 5,520,000 5,064,000 5,093,000
========= ========= =========
Diluted earnings per common share:
Weighted-average common
shares outstanding 5,520,000 5,064,000 5,093,000
Stock options 169,000 132,000 41,000
--------- --------- ---------
Denominator for diluted
earnings per common share 5,689,000 5,196,000 5,134,000
========= ========= =========
</TABLE>
RESEARCH, DEVELOPMENT AND ENGINEERING COSTS - Research and development costs and
engineering costs in support of active products, which are charged to expense
when incurred, amounted to $2.1 million, $2.0 million and $1.7 million in 1998,
1997 and 1996, respectively. Included in these amounts were expenditures of $1.1
million, $0.8 million and $0.9 million in 1998, 1997 and 1996, respectively,
which represent costs related to research and development activities.
FOREIGN CURRENCY TRANSLATION - The assets and liabilities of the Company's
international operations, other than the operations located in a highly
inflationary country, have been translated into U.S. dollars at year-end
exchange rates, with resulting translation gains and losses accumulated as a
separate component of other stockholders' equity. Income and expense items are
converted into U.S. dollars at average rates of exchange prevailing during the
year. Translation adjustments of the operation located in a country with a
highly inflationary economy, which are immaterial, are included as a component
of operating income.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
INVESTMENTS - On March 1, 1994, the Company received 465,000 shares of Mace
Security International common stock, valued at $3.4 million, as partial
consideration for the sale of a division. In March 1996, the Company recorded a
$2.6 million pretax charge to continuing operations to write down the carrying
value of these shares to their current market value as the decline in value of
these shares was determined to be other than temporary. Unrealized holding
losses of $0.2 million were reported as a reduction of other stockholders'
equity at March 31, 1998.
FINANCIAL INSTRUMENTS - The Company does not hold or issue financial instruments
for trading purposes. Amounts to be paid or received under interest rate swap
agreements are recognized as increases or reductions in interest expense in the
periods in which they accrue. The Company enters into off-balance sheet forward
foreign exchange instruments in order to hedge certain financing and investment
transactions denominated in foreign currencies, purchase commitments and certain
foreign currency denominated long-term debt. Gains and losses on the investing
and financing transactions are included in other income/expense. Gains and
losses on the foreign currency purchase commitment transactions are included in
the cost of the underlying purchases.
NEW ACCOUNTING STANDARDS - In 1997, SFAS No. 130, Reporting Comprehensive Income
and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information were issued. The Company is required to adopt these standards for
its fiscal year beginning April 1, 1998. The Company has not yet completed its
analysis of which operating segments, if any, will be disclosed differently than
previously reported.
TRANSTECHNOLOGY CORPORATION
14
<PAGE> 17
2. DISCONTINUED OPERATIONS
In October 1997, the Company sold the facility that was formerly used by its
Financial Systems division for $1.1 million in cash. This sale resulted in an
after-tax disposal loss of $0.1 million.
In June 1995, January 1996 and November 1997, the Company sold the domestic,
European and Australian portions of its computer graphics service operations,
respectively, in three separate transactions to three different buyers. These
businesses were classified as discontinued operations in March 1995. The sale of
the domestic portion for $0.7 million in cash and $0.6 million in notes
receivable was for book value. The sale of the European and Australian portions
was for $0.1 million in cash and $0.2 million in notes receivable and resulted
in an after-tax gain on disposal of $0.1 million in 1996. Additional after-tax
disposal costs of $0.2 million were recorded in 1997 in connection with these
sales.
In August 1995, the Company sold its electronics division for $4.4 million in
cash and $9.6 million in notes receivable. The sale of this operation resulted
in an after-tax gain on disposal of $0.2 million.
In March 1995, the Company sold substantially all of the assets and business of
its chaff products operation for $6.7 million in cash. The sale of this
operation resulted in an after-tax loss on disposal of $0.4 million. An
additional after-tax loss on disposal costs of $0.2 million was recorded in 1996
in connection with the sale. The Company retained the chaff avionics product
line and negotiated its sale separately in May 1995 for $0.3 million in cash and
$0.7 million in notes receivable, resulting in an after-tax charge of $0.4
million. In the fourth quarter of fiscal 1996, the Company recorded an after-tax
charge of $0.4 million to record the anticipated loss on the sale of the
facility that was formerly used by this operation. Additional after-tax disposal
costs of $0.1 million were recorded in both 1998 and 1997 related to the final
sale of this facility.
Additional after-tax costs of $0.8 million, $0.6 million and $0.7 million were
recorded in 1998, 1997 and 1996, respectively, in connection with other
previously discontinued and sold operations. These additional costs represent
adjustments to previous estimates related primarily to legal and environmental
matters.
Operating results of the discontinued businesses were as follows (in thousands):
<TABLE>
<CAPTION>
1996
<S> <C>
Total sales $ 7,951
=======
Loss before income taxes $ (840)
Income tax benefit 323
-------
Loss from operations $ (517)
=======
</TABLE>
The loss from operations includes interest expense of $0.2 million in 1996.
Assets held for sale at March 31, 1998 and 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Inventory $ 197 $ 429
Property 5,157 6,577
Other assets 88 611
------ ------
Assets held for sale $5,442 $7,617
====== ======
</TABLE>
3. ACQUISITIONS
On April 17, 1997, the Company acquired all of the outstanding stock of TCR
Corporation for $32.6 million in cash plus direct acquisition costs and other
contingent consideration. TCR Corporation, located in Minneapolis, Minnesota,
produces cold forged and other externally threaded fasteners and related
products for the automotive, heavy vehicle, marine and industrial markets.
The following summarizes the Company's pro forma information as if the
acquisition of TCR Corporation had occurred at the beginning of the period
presented. The pro forma results give effect to the amortization of goodwill and
additional depreciation and the effects on interest expense and taxes.
TRANSTECHNOLOGY CORPORATION
15
<PAGE> 18
<TABLE>
<CAPTION>
1997
<S> <C>
Net sales $202,026
========
Income from continuing operations $ 10,071
========
Net income $ 9,137
========
Basic earnings per share $ 1.80
========
Diluted earnings per share $ 1.76
========
</TABLE>
The above pro forma information does not purport to be indicative of the
financial results which actually would have occurred had the acquisition been
made at the beginning of the period presented or subsequent to that date.
On June 18, 1996, the Company acquired the Pebra hose clamp business from Pebra
GmbH Paul Braun i.K. for approximately $3 million in cash plus direct
acquisition costs. Pebra manufactures heavy duty hose clamps primarily for use
in the manufacture of heavy trucks in Europe.
On June 30, 1995, the Company acquired the Seeger Group of companies from a unit
of AB SKF of Goteborg, Sweden for approximately $43 million in cash plus direct
acquisition costs and the assumption of trade debts and accrued expenses. The
Seeger Group, headquartered in Konigstein, Germany, manufactures circlips, snap
rings and retaining rings, primarily for use in the manufacture of automotive,
heavy trucks and other industrial and commercial applications.
4. INVENTORIES
Inventories at March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Finished goods $22,515 $21,897
Work in process 11,330 10,335
Purchased and manufactured
parts 20,140 18,445
------- -------
Total $53,985 $50,677
======= =======
</TABLE>
5. INCOME TAXES
The components of total income (loss) from operations (including continuing and
discontinued operations) before income taxes were (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Domestic $17,068 $12,167 $ 8,124
Foreign 860 2,856 3,642
------- ------- -------
Total $17,928 $15,023 $11,766
======= ======= =======
</TABLE>
The provision for income taxes is summarized below (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Currently payable:
Federal $4,325 $3,549 $1,813
Foreign 77 42 656
State 808 975 517
------ ------ ------
5,210 4,566 2,986
Deferred 1,651 1,669 1,406
------ ------ ------
Total $6,861 $6,235 $4,392
====== ====== ======
</TABLE>
The provision (benefit) for income taxes is allocated between continuing and
discontinued operations as summarized below (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Continuing $ 8,162 $ 6,898 $ 5,792
Discontinued (1,301) (663) (1,400)
------- ------- -------
Total $ 6,861 $ 6,235 $ 4,392
======= ======= =======
</TABLE>
The consolidated effective tax rates for continuing operations differ from the
federal statutory rates as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Statutory federal rate 35.0% 35.0% 34.0%
State income taxes
after federal income tax 4.8 4.5 3.6
Earnings of the foreign
sales corporation (2.4) (2.0) (2.6)
Amortization of purchase
adjustments not
deductible for tax
purposes 1.6 -- 1.9
Foreign rate differential -- 2.4 2.6
Other 1.5 1.6 1.0
------ ------ ------
Consolidated effective
tax rate 40.5% 41.5% 40.5%
====== ====== ======
</TABLE>
TRANSTECHNOLOGY CORPORATION
16
<PAGE> 19
The following is an analysis of deferred income taxes (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Assets:
Current:
Inventory $ 1,008 $ 2,025
Net operating loss carryforward 681 650
Tax basis in excess of book
basis on disposal of subsidiary -- 640
Other 1,084 978
------- -------
Total current 2,773 4,293
------- -------
Noncurrent:
Environmental 852 917
Accrued liabilities 1,572 2,068
Investment 1,062 1,128
Net operating loss carryforward 984 1,618
Other 1,623 --
------- -------
Total noncurrent 6,093 5,731
------- -------
Total assets $ 8,866 $10,024
======= =======
Liabilities:
Noncurrent:
Property $10,145 $ 5,862
Other 578 938
------- -------
Total liabilities $10,723 $ 6,800
======= =======
</TABLE>
Summary of deferred income taxes (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Net current assets $ 2,773 $ 4,293
Net noncurrent liabilities (4,630) (1,069)
------- -------
Total $(1,857) $ 3,224
======= =======
</TABLE>
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable to banks and others, including current maturities, at
March 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Credit agreement - 7.58% $ -- $22,825
Credit agreement - 8.50% 2,676 --
Term loan - 7.50% -- 25,289
Term loan - 6.85% 36,099 --
Term loan - 9.79% 24,000 24,500
Other 712 809
------- -------
63,487 73,423
Less current maturities 12,137 5,907
------- -------
Total $51,350 $67,516
======= =======
</TABLE>
CREDIT AGREEMENT - At March 31, 1998, the Company's debt consisted of $1.3
million of borrowings under a revolving credit line, $1.4 million of borrowings
under international lines of credit, a $36.1 million term loan, a $24 million
term loan and $0.7 million of other borrowings. The revolving bank credit line
commitment is $30 million, will be available to the Company through March 31,
2002 and is subject to a borrowing base formula. The agreement provides for
borrowings and letters of credit based on collateralized accounts receivable and
inventory. In addition, all of the remaining assets of the Company and its
subsidiaries are included as collateral. Letters of credit under the line, which
are included in the borrowing base formula, are limited to $5 million. Letters
of credit outstanding under the line at March 31, 1998 were $0.1 million. The
total commitment from the international lines of credit is $10 million and has
the same availability and collateral as the revolving credit line, but is not
subject to a borrowing base formula. Interest on the revolver and international
lines of credit is tied to the primary bank's prime rate, or, at the Company's
option, the London Interbank Offered Rate (LIBOR) plus a margin that varies
depending upon the Company's achievement of certain operating and financial
goals.
The outstanding $36.1 million (which includes $5.4 million and $5.1 million
payable in DM and pound sterling, respectively) and $24 million term loans are
with the same lenders as the revolving and international lines of credit, are
secured by the same collateral and are due and payable on March 31, 2001 and
June 30, 2002, respectively. Quarterly principal payments on the $36.1 million
term loan of $3 million, with escalations to $3.3 million and $4.2 million in
June 1999 and June 2000, respectively, began on December 31, 1995, and are due
and payable on the last day of each quarter through March 31, 2001. Interest on
the $36.1 million term loan is tied to the lending bank's prime rate, or LIBOR,
plus a margin that varies, depending on the Company's achievement of certain
operating and financial goals. Principal payments on the $24 million term loan
of $0.5 million are due and payable annually beginning on June 30, 1996 through
June 30, 2000, with final balloon payments of $7.5 million and $15 million due
and payable on June 30, 2001 and June 30, 2002, respectively. Interest on the
$24 million term loan accrues at the primary lending bank's prime rate plus two
percentage points. The agreement also gives the Company the option of using
LIBOR plus three and one-quarter percentage points. At March 31, 1998, the
Company had $60.1 million of borrowings utilizing LIBOR as the base rate.
TRANSTECHNOLOGY CORPORATION
17
<PAGE> 20
The credit facility limits the Company's ability to pay dividends to 25% of net
income and restricts capital expenditures to $9 million annually, as well as
containing other customary financial covenants.
In November 1997, the Company completed a public stock offering which yielded
net cash proceeds of $28.1 million, including proceeds from stock options
exercised as part of the transaction, which were used to repay the Company's
Revolver, International Lines of Credit and Term Loan A, as stipulated in the
Company's credit agreement.
On March 31, 1997, the Company amended its Term Loan A bank debt to increase the
availability by $20 million, giving the Company a total of $35 million available
for acquisitions. On April 17, 1997, $32.6 million of this amount was used by
the Company to acquire TCR Corporation.
OTHER - Other long-term debt is comprised principally of an obligation due under
a collateralized borrowing arrangement with a fixed interest rate of 3% due
December 2004 and loans on life insurance policies owned by the Company with a
fixed interest rate of 5%.
Debt maturities (in thousands):
<TABLE>
<S> <C>
1999 $12,137
2000 13,063
2001 12,537
2002 10,224
2003 15,050
Thereafter 476
-------
Total $63,487
=======
</TABLE>
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS
Under the terms of the Company's amended and restated 1992 long-term incentive
plan, 800,000 of the Company's common shares may be granted as stock options or
awarded as restricted stock to officers, directors and certain employees of the
Company through September 2002. Option exercise prices equal the market price of
the common shares at their grant dates. Options expire not later than five years
after the date of the grant. Options granted vest ratably over three years
beginning one year after the date of grant. Restricted stock is payable in
equivalent number of common shares; the shares are distributable in a single
installment and vest ratably over a three year period from the date of the
award.
The Company continues to apply the accounting standards set forth in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
However, disclosures are required of pro forma net income and earnings per share
as if the Company had adopted the accounting provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Based on Black-Scholes values, pro
forma net income for 1998, 1997 and 1996 would be $11.0 million, $8.7 million
and $7.4 million, respectively; pro forma diluted earnings per common share for
1998, 1997 and 1996 would be $1.93, $1.73 and $1.45, respectively.
The following table summarizes stock option activity over the past three years
under the plan:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding at April 1, 1995 375,015 $12.37
Granted 109,000 12.40
Exercised (20,308) 9.22
Canceled or expired (55,111) 13.12
--------
Outstanding at March 31, 1996 408,596 12.62
Granted 97,000) 16.85
Exercised (30,381) 12.04
Canceled or expired (11,001) 12.55
--------
Outstanding at March 31, 1997 464,214 13.54
Granted 96,000 21.07
Exercised (178,416) 12.41
Canceled or expired (8,000) 15.00
--------
Outstanding at March 31, 1998 373,798 15.63
========
Options exercisable at
March 31, 1996 177,253 11.97
Options exercisable at
March 31, 1997 264,211 12.26
Options exercisable at
March 31, 1998 201,130 13.87
</TABLE>
In 1998, 1997 and 1996, the Company awarded restricted stock totaling 4,792
shares, 6,435 shares and 18,267 shares, respectively. The weighted-average fair
value of this restricted stock was $22.14, $17.25 and $13.33 in 1998, 1997 and
1996, respectively. The expense recorded in 1998, 1997 and 1996 for restricted
stock awards was $60,000, $159,000 and $122,000, respectively.
The weighted-average Black-Scholes value per option granted in 1998, 1997 and
1996 was $19.75, $13.55 and $10.28, respectively. The following weighted-average
assumptions were used in the Black-Scholes option pricing model for options
granted in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Dividend yield 1.0% 1.4% 2.0%
Volatility 25.0% 29.0% 25.0%
Risk-free interest rate 6.0% 6.2% 5.7%
Expected term of options (in years) 4.0 4.0 4.0
</TABLE>
TRANSTECHNOLOGY CORPORATION
18
<PAGE> 21
For options outstanding and exercisable at March 31, 1998, the exercise price
ranges and average remaining lives were:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ------------------------------------
Number Weighted- Weighted- Number Weighted-
Range of Outstanding Average Average Exercisable Average
Exercise at Remaining Exercise at Exercise
Prices March 31, 1998 Life Price March 31, 1998 Price
<S> <C> <C> <C> <C> <C>
$ 9-14 110,643 2 $ 11.91 84,642 $ 11.70
15-19 173,155 2 15.93 116,488 15.45
20-27 90,000 4 21.11 -- --
------- ------- ------- -------
373,798 3 $ 15.63 201,130 $ 13.87
------- ------- ------- -------
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company has an incentive bonus plan which provides for cash payments to
selected employees based upon formulas approved by the Board of Directors.
Provisions for awards under the plan approximated $2.0 million, $1.6 million and
$1.7 million in 1998, 1997 and 1996, respectively. The Company has three defined
contribution plans covering substantially all domestic employees. Contributions
are based on certain percentages of an employee's eligible compensation.
Expenses related to these plans were $2.8 million, $2.5 million and $2.2 million
in 1998, 1997 and 1996, respectively.
The Company provides postretirement benefits to union employees at one of the
Company's divisions. The Company continues to fund these benefits on a
pay-as-you-go basis.
The components of net postretirement benefit cost for the years ended March 31
were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Service cost (benefits
earned during the year) $ 2 $ 3 $ 88
Interest cost on projected
postretirement
benefit obligation 72 79 168
Amortization of transition
obligation -- -- 101
Amortization of net gain -- -- (10)
--- --- -----
Total postretirement
benefit cost $74 $82 $ 347
--- --- -----
</TABLE>
The accumulated postretirement benefit obligation and funded status at March 31
were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ (950) $ (920)
Fully eligible plan participants (22) (20)
Other active plan participants (82) (70)
------- -------
Accumulated postretirement benefit
obligation (1,054) (1,010)
Unrecognized net loss (gain) 63 (6)
------- -------
Accrued postretirement
benefit liability $ (991) $(1,016)
------- -------
</TABLE>
During fiscal year 1997, the Plan was amended reducing the remaining service
lives of participants and limiting certain benefits provided by the Plan. The
curtailment resulted in an additional 1997 expense of approximately $530,000.
Accrued postretirement benefit cost is included in other liabilities on the
balance sheet.
The assumed health care cost trend rates used for measurement purposes were
11.0% and 12.0% for 1998 and 1997, respectively, trending down 1.0% each year to
10.0% in 1999 and then decreasing 0.5% each year to 6.0% in 2007 and beyond, for
substantially all participants. The weighted-average discount rate used was 7.0%
and 7.5% at March 31, 1998 and 1997, respectively.
A 1.0% increase in the health care trend rate would increase the annual expense
by approximately 14.9% for the year ended March 31, 1998 and the accumulated
postretirement benefit obligation by approximately 14.6% at March 31, 1998.
TRANSTECHNOLOGY CORPORATION
19
<PAGE> 22
In addition, the Company maintains several defined benefit retirement plans for
certain non-U.S. employees. Funding policies are based on local statutes. Net
periodic pension cost for the plans includes the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Service cost $ 42 $ 49 $ 40
Interest cost 346 436 343
Net deferral and amortization 121 43 34
---- ---- ----
Net periodic pension cost $509 $528 $417
---- ---- ----
</TABLE>
The following table sets forth the funded status of the plan at March 31, 1998
and 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total accumulated benefit obligation $(4,921) $(5,408)
------- -------
Projected benefit obligation $(4,999) $(5,489)
Unrecognized net (gain) (213) (75)
------- -------
Unfunded accrued pension cost
(included in other long-term
liabilities) $(5,212) $(5,564)
------- -------
</TABLE>
In determining the projected benefit obligation, the discount rate was 7.25% for
both 1998 and 1997 and the rate of salary increases was 2.5% in both 1998 and
1997.
9. FINANCIAL INSTRUMENTS
INTEREST RATE SWAP AGREEMENTS - The Company periodically enters into interest
rate swap agreements to effectively convert all or a portion of its
floating-rate debt to fixed-rate debt in order to reduce the Company's risk to
movements in interest rates. Such agreements involve the exchange of fixed and
floating interest rate payments over the life of the agreement without the
exchange of the underlying principal amounts. Accordingly, the impact of
fluctuations in interest rates on these interest rate swap agreements is fully
offset by the opposite impact on the related debt. Swap agreements are only
entered into with strong creditworthy counterparties. The swap agreements in
effect were as follows:
<TABLE>
<CAPTION>
Notional
Amount Receive Pay
(In thousands) Maturities Rate (1) Rate
<S> <C> <C> <C> <C>
March 31, 1998 $ 25,000 8/98 5.65% 6.54%
DM9,981 12/98 3.53% 4.57%
March 31, 1997 $ 25,000 8/98 5.56% 6.54%
DM12,648 12/98 3.31% 4.57%
</TABLE>
(1) Based on three-month LIBOR
Foreign Currency Exchange Agreements - The Company enters into forward foreign
currency agreements to hedge foreign currency financing transactions. Realized
and unrealized gains and losses arising from forward currency contracts are
recognized as adjustments to the gains and losses resulting from the underlying
hedged transactions.
In addition, the Company enters into forward currency contracts to hedge certain
foreign currency purchase commitments. Gains and losses from these transactions
are included in the cost of the underlying purchases.
The table below summarizes by currency the contractual amounts of the Company's
foreign exchange contracts. The "Buy" amounts represent the U.S. dollar
equivalent of commitments to purchase foreign currencies, and the "Sell" amounts
represent the U.S. dollar equivalent to sell foreign currencies (in thousands):
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
Buy Sell Buy Sell
<S> <C> <C> <C> <C>
Currency
Deutsche mark $ -- $16,405 $ 96 $11,992
Pound sterling 3,677 8,507 -- 1,459
------- ------- ------- -------
$ 3,677 $24,912 $ 96 $13,451
------- ------- ------- -------
</TABLE>
Fair Value of Financial Instruments - The fair values of cash and cash
equivalents, receivables and notes receivable approximate their carrying values
due to the short-term nature of the instruments.
The fair value of the Company's long-term notes receivable and debt approximates
their carrying values due to the variable interest-rate feature of the
instruments. The fair values of the Company's interest rate swaps and forward
foreign exchange agreements are the estimated amounts the Company would have to
(pay) or receive to terminate the agreements based upon quoted market prices as
provided by financial institutions which are counterparties to the agreements
and were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
(Pay) receive (Pay) receive
<S> <C> <C>
Interest rate swap
agreements $ (141) $ (240)
Forward foreign
exchange agreements $ 20 $ 1,329
</TABLE>
TRANSTECHNOLOGY CORPORATION
20
<PAGE> 23
10. COMMITMENTS
Rent expense under operating leases net of sublease income, for the years ended
March 31, 1998, 1997 and 1996 was $2.3 million, $2.3 million and $2.0 million,
respectively.
The Company and its subsidiaries have minimum rental commitments under
noncancellable operating leases (relating primarily to leased buildings) which
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
<S> <C>
1999 $ 2,689
2000 1,597
2001 1,076
2002 705
2003 101
--------
Total $ 6,168
========
</TABLE>
11. CONTINGENCIES
ENVIRONMENTAL MATTERS - The Company has commenced environmental site assessments
and cleanup feasibility studies to determine the presence, extent and sources of
any environmental contamination at a site in Pennsylvania which continues to be
owned although the related business has been sold. Although no governmental
action requiring remediation has been taken at this time, the Company is working
in cooperation with the relevant state authority and any remedial work required
to be performed would be subject to its approval. A design report for
implementation of a portion of a remedy at the Pennsylvania site has been
prepared and submitted to the state. At March 31, 1998, the balance of the
Company's cleanup reserve was $1.9 million payable over the next several years.
In addition, the Company is pursuing recovery of a portion of cleanup costs in
litigation with several of its insurance carriers. The Company has also entered
into preliminary discussions with the Federal government for recovery of cleanup
costs. The Company expects that remediation work at the Pennsylvania site will
not be completed before fiscal 2000.
The Company also continues to participate in environmental assessments and
remediation work at ten other locations, which include operating facilities,
facilities for sale and previously owned facilities. The Company estimates that
its potential cost for implementing corrective action at these sites will not
exceed $1.3 million payable over the next several years, and has provided for
the estimated costs in its accrual for environmental liabilities.
In addition, the Company has been named as a potentially responsible party in
six environmental proceedings pending in several other states in which it is
alleged that the Company was a generator of waste that was sent to landfills and
other treatment facilities and, as to several sites, it is alleged that the
Company was an owner or operator. Such properties generally relate to businesses
which have been sold or discontinued. It is not possible to reliably estimate
the costs associated with any remedial work to be performed until studies at
these sites have been completed, the scope of work defined and a method of
remediation selected and approved by the relevant state authorities, and the
costs allocated among the potentially responsible parties.
Litigation - The Company is also engaged in various other legal proceedings
incidental to its business. It is the opinion of management that, after taking
into consideration information furnished by its counsel, the above matters will
have no material effect on the Company's consolidated financial position or the
results of the Company's operations in future periods.
12. SEGMENT AND GEOGRAPHIC INFORMATION
The Company develops, manufactures and sells, primarily, specialty fastener
products and rescue hoist and cargo hook products. Specialty Fastener Products
include gear-driven band fasteners, circlips, threaded and non-threaded assembly
fasteners, retaining rings and custom cold forged parts for the auto, heavy
equipment, industrial machinery, consumer/durables, aircraft and marine
industries. Rescue Hoist and Cargo Hook Products include lifting, control and
restraint devices - principally helicopter rescue hoists and external hook
systems, winches and hoists for aircraft and weapons-handling systems and
aircraft and cargo tie-downs.
Operating profit is net sales less operating expenses. General corporate
expenses, interest and income taxes have not been deducted in determining
operating profit. Assets, depreciation and amortization, and capital
expenditures are those identifiable to a particular segment by their use.
Approximately 11.0%, 9.0% and 8.0% of sales from continuing operations in 1998,
1997 and 1996, respectively, were derived from sales to the United States
Government and its prime contractors and are attributable primarily to the
Rescue Hoist and Cargo Hook Products Segment.
TRANSTECHNOLOGY CORPORATION
21
<PAGE> 24
<TABLE>
<CAPTION>
OPERATING DEPRECIATION/
FISCAL PROFIT CAPITAL AMORTIZATION IDENTIFIABLE
(In thousands) YEAR SALES (LOSS)(1) EXPENDITURES EXPENSE(2) ASSETS
---- ----- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Specialty fastener 1998 $168,469 $ 26,177 $7,935 $7,801 $178,331
products 1997 144,197 24,040 4,715 5,881 140,960
1996 127,487 23,702 5,171 4,710 138,001
---- -------- -------- ------ ------ --------
Rescue hoist and 1998 35,459 9,285 469 544 25,540
cargo hook products 1997 34,487 7,483 618 645 26,146
1996 30,537 4,928 901 756 26,334
---- -------- -------- ------ ------ --------
Total segments 1998 203,928 35,462 8,404 8,345 203,871
1997 178,684 31,523 5,333 6,526 167,106
1996 158,024 28,630 6,072 5,466 164,335
---- -------- -------- ------ ------ --------
Corporate 1998 -- (9,119) 341 709 32,202
1997 -- (9,253) 144 825 32,030
1996 -- (8,987) 399 438 35,032
---- -------- -------- ------ ------ --------
Corporate interest 1998 -- 1,038 -- -- --
and other income 1997 -- 1,147 -- -- --
1996 -- 973 -- -- --
---- -------- -------- ------ ------ --------
Interest expense 1998 -- (7,228) -- -- --
1997 -- (6,797) -- -- --
1996 -- (6,316) -- -- --
---- -------- -------- ------ ------ --------
Consolidated 1998 $203,928 $ 20,153 $8,745 $9,054 $236,073
1997 178,684 16,620 5,477 7,351 199,136
1996 158,024 14,300 6,471 5,904 199,367
</TABLE>
(1) Operating profit represents net sales less operating expenses which include
all costs and expenses related to the Company's operations in each segment.
General corporate expenses and investments and other income earned at the
corporate level are included in the corporate section. Interest expense is also
separately reported. The amount of the "Consolidated" line represents "Income
from Continuing Operations Before Income Taxes." Loss from discontinued
operations is not included.
(2) The depreciation/amortization expense from discontinued operations is
excluded from the above schedule.
In 1998, 1997 and 1996, the Company had revenues from export sales as follows
(in thousands):
<TABLE>
<CAPTION>
Location 1998 1997 1996
<S> <C> <C> <C>
Western Europe $ 7,980 $ 8,349 $ 7,230
Canada 7,095 6,316 6,323
Pacific and Far East 2,296 3,027 2,312
Mexico, Central and South America 2,556 1,751 851
Middle East 194 194 167
Other 158 156 22
------- ------- -------
Total $20,279 $19,793 $16,905
======= ======= =======
</TABLE>
TRANSTECHNOLOGY CORPORATION
22
<PAGE> 25
Results set forth below for international operations represent sales and
operating income of foreign based subsidiaries (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net sales:
Domestic operations $ 146,682 $ 120,655 $ 112,860
International operations (1) 57,246 58,029 45,164
--------- --------- ---------
Net sales $ 203,928 $ 178,684 $ 158,024
========= ========= =========
Operating income:
Domestic operations $ 30,808 $ 24,991 $ 22,454
International operations (1) 4,654 6,532 6,176
--------- --------- ---------
Operating income 35,462 31,523 28,630
Interest expense (7,228) (6,797) (6,316)
Corporate expense and other (8,081) (8,106) (8,014)
--------- --------- ---------
Income from continuing operations before taxes $ 20,153 $ 16,620 $ 14,300
========= ========= =========
Identifiable assets:
Domestic operations $ 136,347 $ 94,794 $ 96,944
International operations (1) 67,524 72,312 67,391
Corporate 32,202 32,030 35,032
--------- --------- ---------
Total assets $ 236,073 $ 199,136 $ 199,367
========= ========= =========
</TABLE>
(1) International operations are primarily located in Europe.
13. UNAUDITED QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
1998
Net sales $ 49,923 $50,013 $48,452 $55,540 $203,928
Gross profit 15,348 15,933 16,454 18,373 66,108
Income from continuing operations 2,367 2,387 3,314 3,923 11,991
Loss from discontinued operations (102) (125) (161) (536) (924)
-------- ------- ------- ------- --------
Net income $ 2,265 $ 2,262 $ 3,153 $ 3,387 $ 11,067
======== ======= ======= ======= ========
Basic earnings (loss) per share:
Income from continuing operations $ 0.47 $ 0.47 $ 0.58 $ 0.63 $ 2.17
Loss from discontinued operations (0.02) (0.02) (0.03) (0.09) (0.17)
-------- ------- ------- ------- --------
Net income $ 0.45 $ 0.45 $ 0.55 $ 0.54 $ 2.00
======== ======= ======= ======= ========
Diluted earnings (loss) per share:
Income from continuing operations $ 0.46 $ 0.45 $ 0.57 $ 0.61 $ 2.11
Loss from discontinued operations (0.02) (0.02) (0.03) (0.08) (0.16)
-------- ------- ------- ------- --------
Net income $ 0.44 $ 0.43 $ 0.54 $ 0.53 $ 1.95
======== ======= ======= ======= ========
1997
Net sales $ 44,640 $43,580 $42,851 $47,613 $178,684
Gross profit 13,701 12,496 13,990 16,017 56,204
Income from continuing operations 2,097 1,727 3,020 2,878 9,722
Loss from discontinued operations (269) (206) (199) (260) (934)
-------- ------- ------- ------- --------
Net income $ 1,828 $ 1,521 $ 2,821 $ 2,618 $ 8,788
======== ======= ======= ======= ========
Basic earnings (loss) per share:
Income from continuing operations $ 0.41 $ 0.34 $ 0.60 $ 0.55 $ 1.92
Loss from discontinued operations (0.05) (0.04) (0.04) (0.05) (0.18)
-------- ------- ------- ------- --------
Net income $ 0.36 $ 0.30 $ 0.56 $ 0.50 $ 1.74
======== ======= ======= ======= ========
Diluted earnings (loss) per share:
Income from continuing operations $ 0.40 $ 0.33 $ 0.59 $ 0.55 $ 1.87
Loss from discontinued operations (0.05) (0.04) (0.04) (0.05) (0.18)
-------- ------- ------- ------- --------
Net income $ 0.35 $ 0.29 $ 0.55 $ 0.50 $ 1.69
======== ======= ======= ======= ========
</TABLE>
Earnings (loss) per share information has been calculated in accordance with the
provisions of SFAS No. 128.
TRANSTECHNOLOGY CORPORATION
23
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the accompanying consolidated balance sheets of TransTechnology
Corporation and subsidiaries as of March 31, 1998 and 1997, and the related
statements of consolidated operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of The New Seeger Group
(whose members are consolidated subsidiaries) for the period ended March 31,
1996, which statements reflect total revenues constituting 28% of the related
consolidated total for 1996. These statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for The New Seeger Group for the period ended March 31,
1996, is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of TransTechnology Corporation and subsidiaries at March 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1998 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche, LLP
Parsippany, New Jersey
May 12, 1998
TRANSTECHNOLOGY CORPORATION
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company's fiscal year ends on March 31. Accordingly, all references to years
in this Management's Discussion refer to the fiscal year ended March 31 of the
indicated year. Also, when referred to herein, operating profit means net sales
less operating expenses, without deduction for general corporate expenses,
interest and income taxes.
Sales from continuing operations in 1998 were $203.9 million, an increase of
$25.2 million or 14% from 1997, compared with a $20.7 million or a 13% increase
from 1996 to 1997. Gross profit in 1998 increased $9.9 million or 18% from 1997,
compared with an increase of $5.6 million or 11% from 1996 to 1997. Operating
profit from continuing operations for 1998 was $35.5 million, an increase of
$3.9 million or 12% from 1997, compared with an increase of $2.9 million or 10%
from 1996 to 1997. Changes in sales, operating profit and new orders from
continuing operations are discussed below by segment, and additional information
regarding industry segments is contained in Note 12 of the Notes to Financial
Statements.
Net income, including discontinued operations, for 1998 was $11.1 million or
$1.95 per diluted share compared to $8.8 million or $1.69 per diluted share in
1997. These changes in net income were affected both by operating profit, as
discussed in the Business Segment sections below, and by discontinued
operations, as discussed in the Discontinued Operations section below. Net
losses from discontinued operations, including disposal losses, were $0.9
million or $0.16 per diluted share in 1998 and $0.9 million or $0.18 per diluted
share in 1997. Additionally, earnings per share was affected by the completion
of the Company's 1.154 million share stock offering in the third quarter of
1998, as discussed below in the Liquidity and Capital Resources section.
In the first quarter of 1998 the Company acquired all of the outstanding shares
of TCR Corporation, and, in the first quarter of 1997 the Company acquired the
Pebra hose clamp business, as discussed below in the Acquisitions section and
the Business Segment section.
Excluding expense allocations of $0.3 million to a discontinued operation in
1996 and a $2.6 million fourth quarter 1996 pre-tax charge to continuing
operations to write down to market value the carrying value of equity securities
acquired from the sale of a former division when the decline in value of those
securities was determined to be other than temporary, general corporate expense
increased in 1997 by approximately $2.5 million or 38% over 1996. This increase
was primarily due to the Company accruing, as a corporate expense, approximately
$1 million in 1997 relating to the long-term incentive plan. An additional $0.9
million was accrued in 1998 relating to this plan which the Company expects to
pay early in 1999. Increased business development costs, the relocation of the
corporate office out of an operating division's building in 1997 and increased
staffing in both years also contributed to the overall corporate expense
increase in 1998 and 1997 as compared to 1996.
Interest expense increased $0.4 million in 1998 from 1997 and $0.5 million in
1997 from 1996 primarily as a result of increased bank borrowings related to the
acquisition of TCR Corporation in 1998 and the acquisition of the Seeger Group
of companies in 1996, as further discussed below in the Acquisitions section and
Liquidity and Capital Resources section.
TRANSTECHNOLOGY CORPORATION
25
<PAGE> 28
New orders received during 1998 totaled $206.9 million, an increase of $30.4
million or 17% from 1997. New orders received during 1997 totaled $176.5
million, an increase of $13.9 million or 9% from 1996. At March 31, 1998, total
backlog of unfilled orders was $75.9 million compared to $66.5 million and $62.3
million at March 31, 1997 and 1996, respectively. New orders and backlog by
industry segment are discussed below.
SPECIALTY FASTENER PRODUCTS SEGMENT 1998 COMPARED WITH 1997
Sales for the Specialty Fastener Products Segment were $168.5 million in l998,
an increase of $24.3 million or 17% from 1997. The increase in sales was
primarily due to the inclusion of almost a full year of TCR Corporation
operations in l998 and overall increased volume of domestic and European
gear-driven fasteners in l998 as compared to 1997. Specialty Fastener sales were
negatively impacted in l998 by unfavorable currency exchange rates affecting the
Company's European retaining ring businesses and price reductions due to the
continued consolidation of major European distributors. Domestic retaining ring
sales were down primarily as a result of operational problems associated with
the consolidation of the Company's domestic retaining ring businesses.
Operating profit for the Specialty Fastener Products Segment was $26.2 million
in 1998, an increase of $2.1 million or 9% from 1997. The primary factor
contributing to the segment's increased operating profit in l998 was the TCR
Corporation acquisition as well as the domestic and European gear-driven
fasteners sales increases over the prior year as mentioned above. These
increases were partially offset by unfavorable unhedged intercompany foreign
exchange transactions, lower margins for European retaining rings due to the
distributor consolidation, inefficiencies during the absorption of work moved to
the UK from the closed German facility and the stronger dollar versus Deutsche
mark compared to 1997.
In 1998, new orders in the Specialty Fastener Products Segment increased $30.4
million or 17% from 1997. The primary reasons for the increase were the same as
those noted in the paragraph above relative to the increase in sales. Backlog of
unfilled orders were $43.5 million at March 31, 1998 compared to $34 million at
March 31, 1997.
Commencing in 1997 and continuing through 1998, the Company began and has
essentially completed the process of consolidating its domestic retaining ring
manufacturing and distribution facilities, implementing new integrated
manufacturing software and consolidating the marketing, credit, and customer
service staff to a single new location. During this same period, the Company
began the consolidation and standardization of its overseas retaining ring
manufacturing operations by completing both the installation of a new business
information system and the closing of one of its two retaining ring factories in
Germany. Production from this factory was transferred primarily to the Company's
UK manufacturing facility.
SPECIALTY FASTENER PRODUCTS SEGMENT 1997 COMPARED WITH 1996
Sales for the Specialty Fastener Products Segment were $144.2 million in 1997,
an increase of $16.7 million or 13% from 1996. The increase in sales was
primarily due to the inclusion of twelve months of Seeger group operations in
1997 versus nine months of operations in 1996, the inclusion of nine months of
operations of the Pebra hose clamp business in 1997, and overall increased
volume of domestic gear-driven fasteners in 1997 as compared to 1996.
Additionally, Specialty Fastener sales were negatively impacted in 1997 by a
weakened economy in Europe and a stronger dollar versus Deutsche mark as
compared to 1996.
TRANSTECHNOLOGY CORPORATION
26
<PAGE> 29
Operating profit for the Specialty Fastener Products Segment was $24 million in
1997, an increase of $0.3 million or 1% from 1996. The primary factors
contributing to the segment's increased operating profit in 1997 were the sales
increases over the prior year as mentioned above, which were offset by lower
margins in Europe, the result of excess capacity which increased competition,
lowered sales, and resulted in lower factory operating efficiencies, and the
stronger dollar versus Deutsche mark compared to 1996.
In 1997, new orders in the Specialty Fastener Products Segment increased $13.9
million or 9% from 1996. The primary reasons for the increases were the same as
those noted in the paragraph above relative to the increase in sales. Backlog of
unfilled orders was $34 million at March 31, 1997 compared to $31.4 million at
March 31, 1996.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT 1998 COMPARED WITH 1997
Sales for the Rescue Hoist and Cargo Hook Products Segment were $35.5 million in
1998, an increase of $1 million or 3% from 1997. The increase was primarily due
to timing and placement of customer orders.
The Rescue Hoist and Cargo Hook Products Segment reported an operating profit of
$9.3 million in 1998, an increase of $1.8 million or 24% from 1997. The increase
was primarily due to product mix, plant operating efficiency improvements,
higher sales volume and tight inventory management.
In 1998, new orders in the Rescue Hoist and Cargo Hook Products Segment
decreased by $0.8 million or 2% from 1997. This decrease was primarily due to
timing of customer orders. At March 31, 1998, the backlog of unfilled orders was
$32.4 million, compared to $32.5 million at March 31, 1997.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT 1997 COMPARED WITH 1996
Sales for the Rescue Hoist and Cargo Hook Products Segment were $34.5 million in
1997, an increase of $4 million or 13% from 1996. The increase in sales was
primarily due to timing and placement of customer orders.
The Rescue Hoist and Cargo Hook Products Segment reported an operating profit of
$7.5 million in 1997, an increase of $2.6 million or 52% from 1996. The increase
was primarily due to plant operating efficiency improvements, higher sales
volume, product mix and inventory utilization improvements.
In 1997, new orders in the Rescue Hoist and Cargo Hook Products Segment
decreased by $3.6 million or 9% from 1996. This decrease was primarily due to
customer timing of order placement and an unusually high level of orders in
1996. At March 31, 1997, the backlog of unfilled orders was $32.5 million,
compared to $30.9 million at March 31, 1996.
ACQUISITIONS
On April 17, 1997, the Company acquired all of the outstanding stock of TCR
Corporation for $32.6 million in cash plus other contingent consideration.
Located in Minneapolis, Minnesota, TCR produces externally threaded fasteners
and related products for the automotive, heavy vehicle, marine and industrial
markets.
In the first quarter of 1997, the Company acquired the Pebra hose clamp business
from Pebra GmbH Paul Braun i.K. for approximately $3 million in cash plus direct
acquisition costs. Pebra is located in Frittlingen, Germany and manufactures
heavy duty hose clamps primarily for use in the production of heavy trucks in
Europe.
TRANSTECHNOLOGY CORPORATION
27
<PAGE> 30
In 1996, the Company acquired the Seeger Group of companies from a unit of AB
SKF of Goteborg, Sweden for approximately $43 million in cash plus direct
acquisition costs and the assumption of trade debt and accrued expenses. The
Seeger Group, headquartered in Konigstein, Germany, manufactures circlips, snap
rings and retaining rings primarily used in the production of automobiles,
trucks, industrial equipment and appliances. The Seeger Group operated under the
trade names "Seeger", "Anderton" and "Waldes" at its manufacturing facilities
located in Germany, the UK, Brazil and the U.S.
DISCONTINUED OPERATIONS
In 1996, 1997 and 1998, the Company sold the domestic, European and Australian
portions of its computer graphics service operations, respectively, in three
separate transactions to three different buyers. These businesses were
classified as discontinued operations in 1995. The sale of the domestic portion
for $0.7 million in cash and $0.6 million in notes receivable was for book value
in June 1995; the sale of the European and Australian portions was for $0.1
million in cash and $0.2 million in notes receivable and resulted in an
after-tax gain on disposal of $0.1 million in January 1996. Additional after-tax
disposal costs of $0.2 million were recorded in 1997 in connection with these
sales.
In 1996, the Company sold its electronics division for $4.4 million in cash and
$9.6 million in notes receivable. The sale of this operation resulted in an
after-tax gain on disposal of $0.2 million.
In 1995, the Company sold substantially all of the assets and business of its
chaff products operation for $6.7 million in cash. The sale of this operation
resulted in an after-tax loss on disposal of $0.4 million. Additional after-tax
disposal costs of $0.2 million were recorded in 1996 in connection with the
sale. The Company retained the chaff avionics product line and negotiated its
sale separately in fiscal 1996 for $0.3 million in cash and $0.7 million in
notes receivable, resulting in an after-tax gain on disposal of $0.4 million. In
the fourth quarter of 1996, the Company recorded an after-tax charge of $0.4
million to record the anticipated loss on the sale of the facility that was
formerly used by this operation. The facility was subsequently sold in the first
quarter of 1997. Additional after-tax disposal costs of $0.1 million were
recorded in both 1998 and 1997 related to the final sale of this facility.
Additional after-tax costs of $0.8 million, $0.6 million and $0.7 million were
recorded in 1998, 1997 and 1996, respectively, in connection with other
previously discontinued and sold operations. These additional costs represent
adjustments to previous estimates related primarily to environmental and legal
matters.
OTHER MATTERS
The Company is aware of the issues associated with the programming codes in
existing computer and other systems as the millennium ("Year 2000") approaches.
The Company is utilizing both internal and external resources to correct or
reprogram those existing systems that are not already Year 2000 compliant. The
Company believes that the cost of Year 2000 compliance will not have a material
effect on the Company's results of operations, financial condition and cash
flows. The Company cannot evaluate with accuracy the impact on the Company's
business of customers', suppliers' and vendors' non-compliance with the Year
2000.
During 1998, the Company adopted SFAS No. 128, Earnings Per Share. The Company
is required to adopt SFAS No. 130, Reporting Comprehensive Income, and SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information, for
its fiscal year beginning April 1, 1998. The Company has not yet completed its
analysis of which operating segments, if any, will be disclosed differently than
previously reported.
TRANSTECHNOLOGY CORPORATION
28
<PAGE> 31
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 35%, 49% and 52% as of March 31,
1998, 1997 and 1996, respectively. The current ratio at March 31, 1998, was
2.17, compared to 2.54 and 2.51 at March 31, 1997 and 1996, respectively.
Working capital was $56.4 million at March 31, 1998, down $2.7 million from 1997
and $0.9 million from 1996.
At March 31, 1998, the Company's debt consisted of $1.3 million of borrowings
under a revolving credit line ("the Revolver"), $1.4 million of borrowings under
international lines of credit ("the International Lines of Credit"), a $36.1
million term loan ("Term Loan A"), a $24 million term loan ("Term Loan B") and
$0.7 million of other borrowings. The Revolver commitment of $30 million will be
available to the Company through March 31, 2002 and is subject to a borrowing
base formula. The Company's credit agreement with a group of commercial banks
provides for borrowings and letters or credit based on collateralized accounts
receivable and inventory. In addition, all of the remaining assets of the
Company and its subsidiaries are included as collateral. Letters of credit under
the line at March 31, 1998 were $0.1 million. The total commitment under the
International Lines of Credit is $10 million and subject to the same
availability and collateral as the revolver, but is not subject to a borrowing
base formula. Term Loans A and B are with the same lenders, are secured by the
same collateral as the Revolver and International Lines of Credit and are due
and payable on March 31, 2001, and June 30, 2002, respectively. Interest on Term
Loan A, the Revolver and the International Lines of Credit is tied to the
primary bank's prime rate, or at the Company's option, the London Interbank
Offered Rate ("LIBOR") plus a margin that varies depending upon the Company's
achievement of certain operating and financial goals. Interest on Term Loan B
accrues at the primary lending bank's prime rate plus two percentage points. The
credit agreement also gives the Company the option of using LIBOR plus three and
one-quarter percentage points. At March 31, 1998, $60.1 million of the Company's
outstanding borrowings utilized LIBOR. The Company has an interest rate swap
agreement with the same lender in order to effectively convert a portion of the
floating-rate debt to fixed-rate debt. As of March 31, 1998, the Company has
effectively fixed $24.0 million of floating debt to a fixed rate of 9.79%
through July 31, 1998.
As of March 31, 1997, the availability under Term Loan A was increased by $20
million giving the Company a total of $35 million available for acquisitions. Of
this amount, $32.6 million was used by the Company on April 17, 1997 to acquire
all of the outstanding stock of TCR Corporation.
In November 1997, the Company completed a public stock offering which yielded
net cash proceeds of $28.1 million from the issuance of 1.154 million shares of
common stock. The proceeds from the offering were used to repay a portion of the
Company's Revolving Debt and Term Debt in accordance with the Credit Agreement.
Principal payments on the $36.1 million Term Loan A debt are due quarterly in
the amount of $3.0 million effective June 30, 1998, with escalations to $3.3
million effective June 30, 1999 and $4.2 million effective June 30, 2000.
Principal payments on the $24 million Term Loan B are payable annually in the
amount of $0.5 million through June 30, 2000, with final balloon payments of
$7.5 million and $15 million due on June 30, 2001 and 2002, respectively.
TRANSTECHNOLOGY CORPORATION
29
<PAGE> 32
The credit agreement limits the Company's ability to pay dividends to 25% of net
income and restricts capital expenditures to $9 million annually, as well as
containing other customary financial covenants.
In 1998, the Company completed the sale of the facility that was formerly used
by its Financial Systems division for $1.1 million in cash. The Company also
completed the sale of the former Seeger-Orbis Eichen, Germany retaining ring
facility for $0.9 million in cash. The proceeds from both sales were used to
reduce the Company's Revolver and International Lines of Credit, respectively.
In 1997, the Company completed the sale of a facility formerly used by the chaff
products operation for $2.1 million, the proceeds of which were used to reduce
the Company's Revolver.
Management believes that the Company's anticipated cash flow from operations,
combined with the bank credit agreement described above, will be sufficient to
support working capital requirements, capital expenditures and dividend payments
at their current or expected levels. Capital expenditures in 1998 were $8.7
million compared with $5.5 million in 1997 and $6.5 million in 1996, with
capital expenditures for the Fastener Segment being much larger than those
required by the Rescue Hoist and Cargo Hook Segment.
The Company is subject to various contingencies related to soil and groundwater
contamination at several facilities. Expenditures made pursuant to the
remediation and restoration of these sites approximated $0.6 million in 1998,
$1.1 million in 1997 and $1.3 million in 1996. These expenditures are primarily
of a non-recurring nature and are not capitalized. The Company expects similar
expenditures in 1999 to be in the same range. Management believes that, after
taking into consideration information provided by counsel, the resolution of
these matters will not have a material adverse effect on the Company's
liquidity. Additionally, management believes that the Company's cash flow from
operations, combined with the bank credit agreement described above, will be
sufficient to cover such future expenditures.
TRANSTECHNOLOGY CORPORATION
30
<PAGE> 33
DIRECTORS
*Gideon Argov
Chairman of the Board, President
and Chief Executive Officer
Kollmorgen Corporation
(High-performance motion control systems)
*+Walter Belleville
Chairman and Chief Executive Officer
ATI Machinery, Inc.
(Heavy machinery)
#Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
TransTechnology Corporation
Patrick K. Bolger
President and Chief Operating Officer
TransTechnology Corporation
#+Thomas V. Chema
Partner, Arter & Hadden
(Telecommunications consulting)
Michel Glouchevitch
Managing Director
Triumph Capital Group
*#James A. Lawrence
Executive Vice President and
Chief Financial Officer
Northwest Airlines
William J. Recker
President
Gretag Imaging Group Inc.
* Audit Committee
# Nominating Committee
+ Incentives & Compensation Committee
COUNSEL
Hahn, Loeser & Parks
Cleveland, Ohio
AUDITORS
Deloitte & Touche LLP
Parsippany, New Jersey
TRANSFER AGENT AND REGISTRAR
Wachovia Bank, N.A.
Winston-Salem, North Carolina
CORPORATE OFFICERS
Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
Patrick K. Bolger
President and Chief
Operating Officer
Joseph F. Spanier
Vice President, Chief Financial Officer
and Treasurer
Chandler J. Moisen
Executive Vice President
Gerald C. Harvey
Vice President, Secretary and
General Counsel
Robert L. G. White
President Aerospace Products Group
Robert Tunno
President Domestic Industrial Products Group
Ulf Jemsby
President International Industrial Products Group
Monica Aguirre
Assistant Secretary
OPERATIONAL GROUPS
DOMESTIC INDUSTRIAL PRODUCTS GROUP
BREEZE INDUSTRIAL PRODUCTS
Gear-driven band fasteners
100 Aero-Seal Drive
Saltsburg, PA 15681-9594
724/639-3571
Fax 724/639-3020
www.breezeclamps.com
Robert Tunno - Division President
THE PALNUT COMPANY
Single and multi-thread fasteners
152 Glen Road
Mountainside, NJ 07092-2997
908/233-3300
Fax 908/233-6566
www.palnut.com
Stanley E. Erman - Division President
WALDES/INDUSTRIAL RETAINING RING (IRR)
Multi-sized retaining rings and assembly tools
57 Cordier Street
Irvington, NJ 07111-4035
973/926-5000
Fax 973/926-4699
www.waldes.com
Eugene Landis - Division President
TCR CORPORATION
Cold forged and machined products
1600 67th Avenue North
Minneapolis, MN 55430
612/560-2200
Fax 612/561-0949
John Funk - Division President
INTERNATIONAL INDUSTRIAL PRODUCTS GROUP
THE SEEGER GROUP
SEEGER-ORBIS GMBH
Retaining rings and circlips
Wiesbadener Strasse 243
D-61462 Konigstein, Germany
49/6174 2050
Fax 49/6174 205 100
[email protected]
Ulf Jemsby - Managing Director
PEBRA PRODUCTS DIVISION
Gear driven band fasteners
Werk 4, Hauptsrasse 2/1
78628 Frittlingen, Germany
49/7426 949 20
Fax 49/7426 949 224
ANDERTON INTERNATIONAL LTD.
Retaining rings and circlips
Ferncliff Road
Bingley, West Yorkshire
England BD16 2PL
44/1274 782 200
Fax 44/1274 771 900
Daran Brown - Managing Director
SEEGER-RENO INDUSTRIA
E COMERCIO LTD.
Retaining rings and circlips
Av. Prestes Maia 230
Diaderna, Sao Paulo, Brazil
55/11 713 3133
Fax: 55/11 713 4412
www.seegerreno.com.br
Joao Scivoletto - Managing Director
AEROSPACE PRODUCTS GROUP
BREEZE-EASTERN
Lifting and restraint products
700 Liberty Avenue
Union, NJ 07083-4115
908/686-4000
Fax 908/686-9292
www.breeze-eastern.com
Robert White - Division President
<PAGE> 34
[TRANSTECHNOLOGY CORPORATION LOGO]
150 Allen Road
Liberty Corner, New Jersey 07938
908 / 903-1600
fax 908 / 903-1616
www.transtechnology.com
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES OF
TRANSTECHNOLOGY CORPORATION
Jurisdiction of
Incorporation
Anderton (Predecessors) Limited England
Anderton International Limited England
Electronic Connections and Assemblies, Inc. Delaware
Industrial Retaining Ring Company New Jersey
Palnut Fasteners, Inc. Delaware
Rancho TransTechnology Corporation California
Retainers, Inc. New Jersey
Seeger Inc. Delaware
Seeger-Orbis Beteiligungsgesellschaft GmbH Germany
Seeger-Orbis GmbH & Co. OHG Germany
Seeger Reno Industria e Comercio Ltd. Brazil
SSP Industries California
SSP International Sales, Inc. California
TCR Corporation Minnesota
TranTechnology Acquisition Corporation Delaware
TransTechnology Aerospace, Inc. California
TransTechnology Australasia Pty, Ltd. Australia
TransTechnology (Europe) Ltd. England
TransTechnology International Corporation Virgin Islands
TransTechnology Seeger Inc. Delaware
TransTechnology Seeger-Orbis GmbH Germany
TransTechnology Systems & Services, Inc. Michigan
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,960
<SECURITIES> 0
<RECEIVABLES> 33,244
<ALLOWANCES> 556
<INVENTORY> 53,985
<CURRENT-ASSETS> 104,512
<PP&E> 92,981
<DEPRECIATION> 29,295
<TOTAL-ASSETS> 236,073
<CURRENT-LIABILITIES> 48,081
<BONDS> 63,487
0
0
<COMMON> 66
<OTHER-SE> 6,730
<TOTAL-LIABILITY-AND-EQUITY> 236,073
<SALES> 203,928
<TOTAL-REVENUES> 205,388
<CGS> 137,820
<TOTAL-COSTS> 47,415
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 537
<INTEREST-EXPENSE> 7,228
<INCOME-PRETAX> 20,153
<INCOME-TAX> 8,162
<INCOME-CONTINUING> 11,991
<DISCONTINUED> (924)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,067
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 1.95
</TABLE>
